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- From a financial perspective, how are projects chosen when capital rationing exists? Do you think capital rationing is fair or not?Who deserved the bailout? ExplainAccording to current projections, social security and other entitlement programs will soon be severely underfunded. If the government decides to cut social security benefits to future retirees and raise social security taxes on all workers, what will probably happen to the supply of funds available to the capital markets? What will be the effect on interest rates ?
- In a few sentences, answer the following question as completely as you can. What is a sunk cost?Why is it important to understand this concept when analyzing capital projects?1. Which of the following investors is best suited to an investment objective that is mainly focused on generating capital gains? A well-paid young executive with excess income and preparing for retirement A retired couple whose pension income is insufficient to provide for their regular living expenses A young couple investing their savings for the eventual purchase of a home A salaried person who relies on investment income to meet the costs of raising and educating her childrenWhat is opportunity cost and why is it an important concept in the capital budgeting process? The opportunity cost concept applies to almost every financial decision we make as individuals. Can you give an example from your own experience? What is capital rationing from the perspective of capital budgeting? Give an example of a strength and a weakness of the accounting rate of return approach.