Corporate Finance

Capital Structure Planning

Capital Budgeting Decision Rules - using NPV

A. "Capital Rationing" situation
Select projects whose NPV is positive or equivalent to zero.
Arrange in the descending order of NPVs.
Select Projects starting from the list till the capital budget allows.
B. "No capital Rationing" Situation
 Select every project whose NPV >= 0
C. Mutually Exclusive Projects
 Select the one with a higher NPV.