Sir there is a past exam question for 5 marks that discuss the reasons why investment finance may be limited even when a company has attractive investment opportunities available to it?
Sir will writing the below answer will be sufficient or will we have to explain further?
Theoretically a company should invest in all projects with a positive NPV in order to maximize shareholder wealth. If investment finance is limited for reasons outside a company it is called hard capital rationing.If investment finance is limited for reasons within a company it is called soft capital rationing.
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Soft and hard capital rationing
8y ago#1No - that is not enough for 5 marks. You need to explain hard and soft rationing a bit more.
Read what the examiners answer to this question says and check how the marks are allocated in the marking scheme.
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