Capital rationing
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Evaluating capital rationing
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Please explain how to evaluate a corporations capital rationing plan. How to determine if it is a good policy? And how to determine what better polcy to use.
I'm looking for nuts and bolts, or better the logic and steps to follow that logic
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This discusses the concepts related to Capital rationing
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Please explain how to evaluate a corporation's capital rationing plan. How to determine if it is a good policy? And how to determine what better policy to use.
Capital rationing
Definition
Limiting a company's new investments, either by setting a cap on parts of the capital budget or by using a higher cost of capital when weighing the merits of potential investments. This might happen when a company has not enjoyed good returns from investments in the recent past. Capital rationing also could take place if a company has excess production capacity on hand.
http://www.investorwords.com/729/capital_rationing.html
Capital rationing occurs when a company chooses not to fund all positive NPV projects.
The company typically sets an upper limit on the total amount of capital expenditures that it will make in ...
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