High Tech Monopoly Co. has plenty of cash to fund any conceivable positive NPV project. Can you
Question:
Capital Rationing
Capital rationing is the act of placing restrictions on the amount of new investments or projects undertaken by a company. Capital rationing is the decision process used to select capital projects when there is a limited amount of funding available....
Step by Step Answer:
Financial capital is not the only constrainable item within the firm This might ...View the full answer
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
Related Video
NPV stands for \"Net Present Value,\" which is a financial concept used to determine the value of an investment or project. It measures the difference between the present value of cash inflows and the present value of cash outflows over a given period of time, using a specific discount rate. To calculate the NPV of an investment, you need to first estimate the cash inflows and outflows associated with the investment, and then discount them back to their present values using a discount rate. The discount rate represents the cost of capital or the expected rate of return required by investors. The formula for calculating NPV is: NPV = sum of (cash inflows / (1 + discount rate)^t) - sum of (cash outflows / (1 + discount rate)^t) Where: Cash inflows: the expected cash received from the investment Cash outflows: the expected cash paid out for the investment Discount rate: the required rate of return or the cost of capital t: the time period in which the cash flow occurs If the NPV is positive, it means that the investment is expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a good investment. If the NPV is negative, it means that the investment is not expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a bad investment.
Students also viewed these Corporate Finance questions
-
Describe a situation in which you used organizational behaviour modification to influence someones behaviour. What specifically did you do? What was the result?
-
Describe a situation in which unconscious incubation worked for you. Describe one in which it did not. Can you explain why it worked in the first case but not in the second?
-
Describe a situation in which the sales value at splitoff method cannot be used but the NRV method can be used for joint-cost allocation.
-
A car has a sticker price of $69,000. The car has a 100 hp engine and can accelerate from 0 to 60 mph in 15.8 seconds. The lease rate is 4.6%. The term of the lease is three years. The buyout is...
-
Eco Sacks manufactures cloth shopping bags. The controller is preparing a budget for the coming year and asks for your assistance. The following costs and other data apply to bag production: You...
-
In Exercises, use the limit process to find the area of the region bounded by the graph of the function and the -axis over the given interval. Sketch the region. y = 5x, [-2, 1]
-
Carry out a pre-posterior analysis and find the expected value of perfect information (EVPI).
-
MSA Computer Corporation manufactures two models of minicomputers, the Alpha 4 and the Beta 5. The firm employs five technicians, working 160 hours each per month, on its assembly line. Management...
-
Ali & Co. is a manufacturing business. The following information relates to the year ended 30 April 2005. Direct material Direct labour Factory overheads Work in progress, 1 May 2004 Work in...
-
James, who is in the 35 percent marginal tax bracket, owns 100 percent of the stock of JJ Inc. This year, JJ generates $500,000 taxable income and pays a $100,000 dividend to James. Compute his tax...
-
What is the fundamental difference between a sensitivity analysis and a scenario analysis?
-
The profitability index is a scale less attribute for measuring a projects benefits relative to the costs. How might this help to eliminate bias in project selection?
-
Shoemarts ledger reports that it owes 128,900 to Whites, a supplier; whereas the corresponding figure stated in Whites monthly statement is 154,700. The difference is found to have arisen from: (a) A...
-
Of the three models of prosecuting cases-horizontal model, vertical model, and mixed modelwhich do you think would be most appropriate for the prosecutor's office where you attend school?
-
What do you envision as the future of problem-solving courts? Will additional types of courts develop in the years to come? If so, what types of courts might these be?
-
Points \(A\) and \(B\) are on the same electric field line. If an electron is released and moves from A to \(\mathrm{B},\) (a) is the field directed from \(A\) to \(B\) or from \(B\) to \(A\) ? (b)...
-
What are the most common types of sentences imposed by judges in state and federal courts in the United States? Why are intermediate sanctions used so infrequently?
-
Should judges take the characteristics of the victim or the relationship between the victim and the offender into consideration when determining the appropriate punishment? Why or why not? According...
-
During the due diligence phase of a pharmaceutical companys acquisition, you discover that an executive of the potential target may have funneled payments to government regulators overseeing the...
-
Four GWU students have been selected to taste food sold by 3 different food trucks labeled as food truck A, B and C on H & 22nd Streets every Monday for 3-weeks. For each student, food trucks are...
-
Estimate the specific heat capacity of urea, CH 4 N 2 O.
-
You are at your desk at work when a co-worker excitedly comes to your desk and shows you the scenario analysis that he has just completed for a potential new project. All three scenarios show a...
-
Night Shades, Inc. (NSI), manufactures biotech sunglasses. The variable materials cost is $10.48 per unit, and the variable labor cost is $6.89 per unit. a. What is the variable cost per unit? b....
-
K-Too Ever wear Corporation can manufacture mountain climbing shoes for $31.85 per pair in variable raw material costs and $22.80 per pair in variable labor expense. The shoes sell for $145 per pair....
-
Could Arthur Murray have created language that would have avoided the application of impossibility of performance? What if Parker was not incapac-itated but that it was simply painful to dance after...
-
In the text's case on the county clerk and marriage licenses, whatare the ethical issues involved? What are the conflicting ethical values and whichvalues were maximized/minimized? The Case of the...
-
2 Altira Corporation provides the following information related to its inventory during the month of August 2024: August 1 Inventory on hand-2,000 units%;B cost $5.30 each. August 8 Purchased 8,000...
Study smarter with the SolutionInn App