Question: Why does capital rationing occur? In theory, it shouldn't. In a perfect world,managers who invest only in positive-NPV projects will take shareholders dollars at time

Why does capital rationing occur? In theory, it shouldn't. In a perfect world,managers who invest only in positive-NPV projects will take shareholders dollars at time t and invest them to create more dollars at time t +n. Rational shareholders will, therefore, be willing to supply funds, as long as the benefit is enough to compensate for the risk undertaken.

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