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PROJECT SELECTION UNDER CAPITAL RATIONING

The capital rationing situation refers to the choice of investment proposal under financial constraints in terms of a given size of capital expenditure budget.The project selection under capital rationing involves two stages: (i) identification of the acceptable projects. (ii) selection of the combination of projects. In case the project is to be accepted/rejected in its entirety, it is called an indivisible project: a divisible project on the other hand, can be accepted/rejected in part.

 

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