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Capital Rationing

EEhsan10y ago
Dear Sir, I hope you are doing well, In your lecture Capital rationing is based on NPV values... like NPV/Outlay.. But in textbooks they have used PI index i.e Profitability index where PV/Outlay is used and Total NPV is better based on this approach than First one... So what would you suggest to use? Regards.
John MoffatJohn MoffatTutor10y ago#1
It does not matter. You say "in text books" but different text books show it differently, and the examiner himself does it differently in different exams. If you think about it, then using PV / initial investment will be exactly the same as using NPV/ initial investment and adding 1 to the result. The ranking will not change and neither will the final answer.
EEhsan10y ago#2
Thanks a lot again.. but you didn't include topic in which company can postpone their project for a year ..?
John MoffatJohn MoffatTutor10y ago#3
It is not a separate topic and does not need lectures. If you understand what is in the lecture then you can deal with any question in Paper F5. Paper F5 is not a question of simply learning rules - the examiner deliberately asks questions that test that you understand rather than have simply learned a rule. Our lectures are a complete course for F5 and cover everything you need to be able to pass the exam well - provided that you make sure you understand every lecture.
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