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Capital Rationing with Example (in Hindi)
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  1. Capital Budgeting Decisions By Heena Malhotra

  2. Capital Budgeting under Capital Rationing o There may be a situation due to resource (capital) constraints (rationing) a firm may have to select some projects among various projects. By Heena Malhotra

  3. Shiva Limited is planning its capital investment programme for next year. It has five projects all of which give a positive NPV at the company cut-off rate of 15 percent, the investment outflows and present values being as follows: Investment! NPV @ 15% Project (50) (40) (25) (30) (35) 15.4 18.7 10.1 11.2 19.3 The company is limited to a capital spending of R1,20,000 You are required to optimise the returns from a package of projects within the capital spending limit. The projects are independent of each other and are divisible (ie, part- project is possible) By Heena Malhotra

  4. Computation of NPVs per 1 of Investment and Ranking of the Projects Project Investment NPV@ 15% NPV peri (50) (40) (25) (30) E35) 000 invested 15.4 18.7 10.1 11.2 19.3 0.31 0.47 0.40 0.37 0.55 By Heena Malhotra

  5. Building up of a Programme of Projects based on their Rankings Investment NPV @ 15% Project! 000 (35) (40) (25) (20) 000 19.3 18.7 10.1 7.5 (2/3 of project total) 120 55.6 By Heena Malhotra