The correct answer is: A. Accept-reject situations
The feasibility set approach to capital rationing is a method of capital budgeting that can be used in accept-reject situations. In an accept-reject situation, a company has a limited amount of capital to invest, and must decide which projects to invest in. The feasibility set approach involves identifying all of the projects that are feasible given the company’s capital constraints, and then selecting the projects that have the highest return on investment.
The feasibility set approach is not appropriate for divisible projects or mutually exclusive projects. Divisible projects are projects that can be divided into smaller parts, and mutually exclusive projects are projects that cannot be both accepted. In these cases, the company must decide how much to invest in each project, or which project to accept. The feasibility set approach cannot be used to make these decisions.
Here is a brief explanation of each option:
A. Accept-reject situations
In an accept-reject situation, a company has a limited amount of capital to invest, and must decide which projects to invest in. The feasibility set approach involves identifying all of the projects that are feasible given the company’s capital constraints, and then selecting the projects that have the highest return on investment.B. Divisible projects
Divisible projects are projects that can be divided into smaller parts. For example, a company might have a project to build a new factory. The project could be divided into two parts: the construction of the factory, and the purchase of the equipment. The company could then decide to invest in the construction of the factory, but not in the purchase of the equipment.C. Mutually exclusive projects
Mutually exclusive projects are projects that cannot be both accepted. For example, a company might have two projects to build new factories. The company could not build both factories, so it must decide which project to accept.D. None of the above
This option is not correct. The feasibility set approach can be used in accept-reject situations.