Question

14. Under capital rationing situation, the method used to rank
the indivisible projects is
a) NPV
b) PL
c) Payback
d) None of the above​

Answer 1

Answer:

NPV

Explanation:

(i) Ranking the projects according to the Profitability Index (PI) or Net Present Value (NPV) method; (ii) Selecting projects in descending order of profitability (until the funds are exhausted). The projects can be ranked by any one of the DCF techniques, viz., IRR, NPV and PI.