Uptown Promotions has three divisions. As part of the planning process, the CFO requested that each division

Uptown Promotions has three divisions. As part of the planning process, the CFO requested that each division submit its capital budgeting proposals for next year. These proposals represent positive net present value projects that fall within the long-range plans of the firm. The requests from the divisions are $4.2 million, $3.1 million, and $6.8 million, respectively. For the firm as a whole, the management of Uptown Promotions has limited spending to $10 million for new projects next year. This is an example of:    A.  scenario analysis. B.  sensitivity analysis. C.  determining operating leverage. D.  soft rationing. E.  hard rationing. Refer to section 11.6

57.

Brubaker & Goss has received requests for capital investment funds for next year from each of its five divisions. All requests represent positive net present value projects. All projects are independent. Senior management has decided to allocate the available funds based on the profitability index of each project since the company has insufficient funds to fulfill all of the requests. Management is following a practice known as:    A.  scenario analysis. B.  sensitivity analysis. C.  leveraging. D.  hard rationing. E.  soft rationing. Refer to section 11.6

58.

The CFO of Edward's Food Distributors is continually receiving capital funding requests from its division managers. These requests are seeking funding for positive net present value projects. The CFO continues to deny all funding requests due to the financial situation of the company. Apparently, the company is:    A.  operating at the accounting break-even point. B.  operating at the financial break-even point. C.  facing hard rationing. D.  operating with zero leverage. E.  operating at maximum capacity. Refer to section 11.6