Which of the following is true of the accept-reject approach?
A) It involves ranking projects on the basis of some predetermined measure, such as the rate of return.
B) It cannot be used when the firm has limited funds.
C) It can be used for making capital budgeting decisions when there is capital rationing.
D) It can be used only for evaluating mutually exclusive projects.

Question

Quizplus · Accepted Answer

The accept-reject approach can be used for making capital budgeting decisions even when there is capital rationing. It involves accepting projects that meet a predetermined minimum criteria and rejecting those that do not. Therefore, option A is incorrect as it mentions ranking projects based on some predetermined measure. Option B is also incorrect as the accept-reject approach can be used even when the firm has limited funds. Option D is incorrect as the accept-reject approach can be used for both mutually exclusive and independent projects.

Which of the Following Is True of the Accept-Reject Approach