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The term 'Capital Budgeting' is used interchangeably with capital expenditure management, capital expenditure decision, long term investment decision, management of fixed assets, etc. It may be defined as "planning, evaluation and selection of capital expenditure proposals." Capital budgeting involves a current outlay or serves as outlays of cash resources in return for an anticipated flow of future benefits.

According to G. C. Philippalys, "Capital budgeting is concerned with the allocation of firm's scarce financial resources among the available market opportunities. The consideration of investment opportunities involves comparison of expected future streams of earnings from a project with immediate and subsequent streams of expenditure for it."

Lynch - "Cash budgeting consists in planning, development of available capital for the purpose of maximizing the long term profitability in the concern."

In other words, the system of capital budgeting is employed to evaluate expenditure decisions which involve current outlays, but likely to produce benefits over a period of time longer than one year. These benefits may be either in the form of increased revenue or reduction in costs. Capital expenditure management therefore includes addition, disposition, modification and replacement of fixed assets. The basic features of capital budgeting are:
1. potentially large anticipated benefits;
2. a relatively high degree of risk;
3. a relatively long time period between initial outlay and anticipated returns.

Fixed assets are frequently termed as earning assets of the firm in the sense that they usually generate large return. Future sales growth is correlated with expansion of capital expenditure. It is a specialized process requiring highly sophisticated techniques and intricate forecasting for future years. Closely scrutinized capital expenditure selections result in increased sales, profits, dividends and ultimately share price value of the firm.

Importance
Capital budgeting is of paramount importance in financial decision making. Special care should be taken in making these decisions on account of the following reasons:
1. Such decisions affect the profitability of the firm. They also have bearing on the competitive position of the enterprise. This is mainly because of the fact that they relate to fixed assets. The fixed assets represent in a sense, the true earning assets of the firm. They enable the firm to generate finished goods that can ultimately be sold for a profit. However, current assets are not generally earning assets. They provide a buffer that allows the firm to make sales and extend credit. Capital budgeting decision determine the future destiny of the company. An opportune investment decision can yield spectacular returns. On the other hand an ill advised and incorrect investment decision can endanger the very survival even of large sized firms. A few wrong decisions and a firm can be forced into bankruptcy. Capital budgeting is of utmost importance to avoid over-investment and under-investment in fixed assets.

2. A capital expenditure decision has its effect over a long time span and inevitably affects the company's future cost structure. To illustrate, if a particular plan has been purchased by a company to start a new product, the company commits itself to a sizable amount of fixed assets in terms of supervisors, salary, insurance, rent of buildings and so on. If the investment in future turns out to be unsuccessful or yields less profit than anticipated, the firm will have to bear the burden of fixed costs unless it writes off the investment completely. In short, a firm's future costs, break-even point, sales and profits will all be determined by the firm's selection of assets i.e., capital budgeting. Long term investment decision are more difficult to take because
    (i) decision extends to a series of years and beyond the current accounting period;
    (ii) uncertainties of future; and
    (iii) higher degree of risk.

3. Capital investment decision once made are not easily reversible without much financial loss to the firm. It is because there may be no market for second hand plant and equipment and their conversion to other uses may not be financially feasible.

4. Capital investment involves cost and the majority of the firms have scarce capital resource. This underlines the need for thoughtful, wise and correct investment decisions as an incorrect decision would not only result in losses but also prevent the firm from earning profits from other investments which could not be undertaken for want of funds.

5. Over / Under capacity - To improve timing and quality of asset acquisition, the capital expenditure decision must be carefully drawn. If the firm has invested too much in assets, it will incur unnecessary heavy expenditure. If it has not spent enough on fixed assets, two serious problems may arise
    (i) The firms equipment may not be sufficiently modern to enable it to produce competitively.
    (ii) If it has inadequate capacity it may lose a portion of its share of market to its rival firm. To regain lost customers it would require heavy selling expenses, price reduction, product improvement, etc.

6. Investment decision though taken by individual concerns is one of national importance because it determines employment, economic activities and economic growth.

Capital Budget Decision
Capital budgeting refers to the total process of generating, evaluating, selecting and following up on capital expenditure alternatives. The firm allocates or budgets financial resources to new investment proposals. Basically the firm may be confronted with three types of capital budgeting decisions
1. Accept / Reject decision - This is the fundamental decision in capital budgeting. If the project is accepted, the firm invests in it. If the proposal is rejected the firm does not invest. In general all those proposals which yield a rate of return greater than a certain required rate of return or cost of capital are accepted and the rest are rejected. By applying this criteria, all independent projects are accepted. Independent projects are projects that do not compete with one another in such a way that acceptance of one precludes the possibility of acceptance of another. Under the acceptance decision, all the independent projects that satisfy the minimum investment criteria are implemented.

2. Mutually exclusive project decision - Mutually exclusive projects are projects which compete with other projects in such a way that the acceptance of one will exclude the acceptance of other projects. The alternatives are mutually exclusive and only one may be chosen. It may be noted that the mutually exclusive project decisions are not independent of accept / reject decision. Mutually exclusive investment decisions acquire significance when more than one proposal is acceptable under the accept / reject decision. Then some techniques have to be used to determine the best one. The acceptance of 'best' alternative automatically eliminates the other alternatives.

3. Capital rationing decision - In a situation where the firm has unlimited funds, capital budgeting becomes a very simple process. In that, independent investment proposals yielding a return greater than some predetermined level are accepted. However, this is not the situation prevailing in most of the business firm's of real world. They have fixed capital budget. A large number of investment proposals compete in these limited funds. The firm allocates funds to projects in a manner that it maximizes long run returns. Thus capital rationing refers to the situation where the firm has more acceptable investments requiring a greater amount of finance than is available with the firm. It is concerned with the selection of a group of investment proposals acceptable under the accept / reject decision. Ranking of the investment project is employed. In capital rationing, projects can be ranked on the basis of some predetermined criterion such as the rate of return .The project with highest return is ranked first and the acceptable projects are ranked thereafter.

Kinds of capital budgeting proposals
1. Replacement / modification of fixed assets - e.g. worn out, obsolete are replaced at appropriate time.

2. Expansion - involves an addition of capacity to existing production facilities.

3. Modernization of investment expenditure - they make it easier for a firm to reduce cost and may coincide with replacement decision.

4. Strategic investment proposal - these are capital budgeting decisions which do not assume that the return will be immediate or measured over a long period of time. Strategic investment are defensive, offensive and mixed motive decision. The vertical integration of a firm is an example of defensive investment in which a continuous source of raw materials is assumed. Horizontal combinations are offensive investments for they ensure a firm's internal and external growth respectively. Mixed motive investment are outlays on research and development programmes.

5. Diversification of business - means operating in several markets or firm one market into another market. It may even amount to changing product lines.

6. Research and development - where the technology is rapidly changing, research and development area is a continuous activity in any firm. Usually large sums of money are invested in research and development activities which lead to capital budgeting decisions.

Methods of investment evaluation or capital budgeting appraisal methods
There are several methods of evaluating and ranking the capital investment proposals. The basic approach is to compare the investment of the project with the returns derived thereof. The following are main methods generally adopted in investment evaluation.
1. Payback period method
2. Accounting / Average rate of return
3. Discounted cash flow method / Time adjusted techniques
    (a) The present value method
    (b) Profitability index / Benefit cost ratio
    (c) Internal rate of return

Payback Method
It is a traditional method of capital budgeting. It is the simplest and most widely employed quantitative method for appraising capital expenditure decisions. This method answers the question - how many years will it take for cash benefits to pay the original cost of an investment normally disregarding salvage value. Cash benefits here represent cash flow after tax (CFAT) technique to pay back the original outlay required in an investment proposal.

There are two ways of calculating the payback period. The first method can be applied when the cash flow stream is in the nature of annuity for each year of project's life, where cash flow adjusted techniques are uniform. In such a situation the initial cost of investment is divided by the constant annual cash flow. The second method is used when a project's cash flows are not equal, but vary from year to year. In such a situation payback is calculated by the process of accumulating cash flows till the time when cumulative cash flows are equal to original investment outlay.

Accept / Reject criterion
The payback period can be used as a decision criterion to accept or reject an investment proposal. One application of this technique is to compare the actual payback period with a predetermined payback i.e., the payback set up by the management. If the actual payback period is less than the predetermined payback, the project will be accepted. If not, it will be rejected. Alternatively the payback can be used as a rationing method. When mutually exclusive projects are under one consideration, they may be ranked according to the length of payback period. Thus the project having the shortest payback may be assigned rank one followed in the order so that the project with longest payback might be ranked last. The term mutually exclusive refers to the proposals out of which only one can be accepted. Obviously project with shorter payback period will be selected.

Evaluation
The payback method has certain merits. Its most outstanding merit is that it is easy to calculate and simple to understand. The payback method is an improvement over the average rate of return approach. Its superiority arises due to the fact that it is based on cash flow analysis.

Original cost of both the machines is Rs. 56,125. Cash flow of the fifth year includes RS 3,000 salvage value. Cash inflows are as under. Calculate payback period.

Year	Machine A (Cash Flow)	Cumulative Cash Flows	Machine B (Cash Flow)	Cumulative Cash Flows
1	14,000	14,000	22,000	22,000
2	16,000	30,000	20,000	42,000
3	18,000	48,000	18,000	60,000
4	20,000	68,000	16,000	76,000
5	25,000	93,000	17,000	93,000

Cash flow adjusted technique of fifth year includes Rs. 3,000 salvage value. The invested investment of Rs. 56,125 on Machine A will be received between 3 to 4 years. Payback period makes three years plus a fraction of a year.

Machine A
56,125 - 48,000 = 8,125
(Balance of 8,125 >> received of fourth year)
8,125 / 20,000 = 0.406 years + 3 preceding years = 3.406 years

Machine B
2 years + (14,125 / 18,000) = 2.785 years

The average cash flows for both the machines under the average rate of return methods are the same. The payback period method shows that the payback period for Machine B should be preferred as it refunds the capital outlay earlier than Machine A. The payback method however suffers from serious limitations. Its major shortcomings are as follows:
1. The first major shortcoming of payback method is that it ignores all cash inflows after the payback period. This could be very misleading in capital budgeting valuation. E.g.,

	P.X	P.Y
Total cost of project	15,000	15,000
Year: 1	15,000	15,000
2	6,000	5,000
3	4,000	6,000
4	0	6,000
5	0	3,000
6	0	3,000
Payback period	3 years	3 years

In fact the projects differ widely in respect of cash inflows generated after the payback period. The cash flows for P.X stops at the end of the third year, while that Y continues till the sixth year. Under the payback period method however, both the projects were given equal ranking which is apparently incorrect. Therefore, it cannot be regarded as a means of profitability. It's failure lies in the fact that it does not consider the total benefits accruing from the profits.

2. Another deficiency of payback method is that it does not measure correctly even the cash flows expected to be received within the payback period as it does not differentiate between projects in terms of timing or magnitude of cash flows. It considers only the recovery period as a whole. This happens because it does not discount the future cash inflows but rather treats a rupee received from second or third year as valuable as a rupee received from first year. In other words, to the extent that payback method fails to consider the pattern of cash inflows, it ignores the time value of money. E.g.,
    (i) Both project A and B have the same outlays in the zero time period.
    (ii) Some total cash inflow of Rs. 15,000 and
    (iii) Some to the firm because it returns cash earlier than project B, enabling firm A to repay a loan or reinvest in at an earlier date and earn a return.

	P.A	P.B
Total cost of project	15,000	15,000
Cash inflow (CFAT) 1	10,000	1,000
2	4,000	4,000
3	1,000	1,000

4. Another failure of the payback method is that it does not take into consideration the entire life of the project during which cash flows are generated. As a result the project with large inflows in the later part of their lives may be rejected in favour of less profitable projects which happen to generate a larger proportion of their cash inflows in the earlier part of their lives. E.g.,

	P.A	P.B
Total cost of project	40,000	40,000
Cash inflow (CFAT) 1	14,000	10,000
2	16,000	10,000
3	10,000	10,000
4	4,000	10,000
5	2,000	12,000
6	1,000	16,000
7	-	17,000
Payback period	3 Years	4 Years

It is quite evident just from a casual inspection that P.B is more profitable than P.A since the cash flow of former amounts to 45,000 after the expiry of payback period and the cash flow of the latter beyond the payback period is only 6,000.

5. It does not reflect all the relevant dimensions of profitability.

The above weakness notwithstanding the payback period method can be gainfully employed under certain conditions.
1. Where the long term outlook, say in excess of 3 years is extremely lazy, payback method may be useful.

2. Likewise this method may be very appropriate for the firm suffering from a liquidity crisis. A firm with limited liquid assets and no ability to raise additional funds, will nevertheless wish to undertake capital projects in the hope of easing the crisis might use payback as a selection criterion because it emphasizes quick recovery of firm's original outlay.

3. Payback period method may also be beneficial for the capital budgeting decisions in firms which lay more emphasis on short-term run earning performance rather than its long-term growth. In brief, the payback period is a measure of liquidity of investments rather than their profitability.

4. Finally the payback period is useful apart from measuring liquidity, in making calculation in certain situations. For instance the IRR can be computed easily by payback period. The payback method is a good approximation of IRR which otherwise requires a trial approach.

5. This method reduces the possibility of loss on account of obsolesce as the method prefers investment in short-term projects.

6. It is used as a quick method of approximation in screening proposals.

7. This method makes it clear that no profits arise till the payback period is over. This helps companies in deciding when they should start paying dividends.

Accounting or Average Rate of Return
Return on investment method overcomes the deficiencies of payback period method in the sense that it considers the earnings of a project over its entire economic life.
1. The return on investment is estimated i.e., earnings or profits estimated from an investment proposal during its economic life, after providing for depreciation and taxes. It means net profit from estimation are as per the accounting principles.

2. The rate of return is compared with cut off rate as determined by the management. Cut off rate is the minimum rate of return on investment. It should be generated from a profit which is generally the firm's cost of capital. Cost of capital 15% - cut off rate of return = 15%. The comparison helps management to rank the various projects and select the most profitable one. If return on investment proposal is less than the cut off rate, it is rejected and accepted if it is equal or more than the cut off rate. In case of mutually exclusive alternative projects, the projects with higher rate of return are selected.

Calculation - four ways / methods
(a) Total return on total investment
(b) Return per amount / rupee of money invested
(c) Average return on investment method
(d) Average return on average investment method

Average return on investment method
1. The most favourable attribute of this method is its simplicity. It is easy to understand.

2. It is based on the accounting concepts of profit which are easily calculated for financial data.

3. The total benefits associated with projects are taken into account while calculating the IRR. Payback method for instance do no use the entire stream of income. This approval gives due weightage for the profitability of project.

4. Profits determined under this method after deducting depreciation and tax are as per the accounting principles which gives a better basis of commission.

However, this method of evaluating investment proposals suffers from serious deficiencies.
1. It uses accounting profits and not cash flows in appraising the projects. Accounting profits are based on arbitrary assumptions and choices and also include non-cash items. It is, therefore, inappropriate to rely on them for measuring the acceptability of the investment projects.

2. It does not take into account the time value of money. The timing of cash inflows and outflows is a major decision valuable in financial decision making. Accordingly benefits in the earlier years and later years cannot be valued at par. To that extent, the ARR method treats these benefits at par and fails to take into account the difference in the time value of money.

3. It does not differentiate between the size of investment regarding each project. Competing investment proposals may have the same ARR but may require different average investments.

Machine	Average annual earnings	Average interest	ARR
A	6,000	30,000	20%
B	2,000	10,000	20%
C	4,000	20,000	20%

The ARR method in such a situation will leave the firm in an indeterminate position.

4. This method does not take into consideration any benefits which can accrue to the firm from the sale or abandonment of equipment which is replaced by the new investment. The new investment from the point of view of correct financial decision should be measured in terms of incremental cash outflow due to new investment (i.e., new investment minus sale proceeds of existing equipment plus / minus tax adjustment). But the ARR method doesn't make any adjustment in this regard to determine the level of average investment. Investment in fixed assets are determined at their acquisition costs.

5. It ignores the period in which the profits are earned as, a 20% rate of return earned in 2½ years may be considered to be better than 18% rate of return in 12 years. This is not proper because longer the term of project, greater the risk.

6. This method cannot be applied to a situation where investment in a project is to be made in parts.

Discounted cash flow / Time adjusted techniques
The distinguished characteristic of the discounted cash flow capital budgeting technique is that they take into consideration the time value of money while evaluating the cost and benefits of a project. In between firm or another, all these methods require cash flows to be discounted at a certain rate of popularity called cost of capital. Cost of capital is the minimum discount rate that must be earned on a project that leaves are discounted to their present values only on the ground that a rupee received at a future date is worth less than a rupee received today.
1. It takes into account all the benefits and costs occurring during the earnings for profit, for an entire economic life of the project.

2. It takes into account the time factor while evaluating the profitability of a project, in the sense that they recognize the fact that the value of a rupee received at a future date is less than its present value.

3. They provide for uncertainty and risk as they recognize the time factor while evaluating the profitability of investment proposals.

4. They are more scientific and dependable.

Demerits
1. They are complicated as they involve a good amount of calculations.
2. They do not correspond to the accounting concepts while recording costs and reserves.
3. They are not suitable for ranking projects regarding different capital outlay.

Discounted cash flow methods are suitable for evaluating projects when cash flows are uneven. They are quite valuable for long term capital decisions.

Discounted cash flow methods
1. Net present value method
2. Present value index method
3. Discount

Net present value method
The cash inflow in different years are discounted (reduced) to their present value by applying the appropriate discount factor or rate and the gross or total present value of cash flows of different years are ascertained. The total present value of cash inflows are compared with present value of cash outflows (cost of project) and the net present value or the excess present value of the project and the difference between total present value of cash inflow and present value of cash outflow is ascertained and on this basis, the various investments proposals are ranked.

Cash inflow = earnings / profits of an investment after taxes but before depreciation

The present value of cash outflows = initial cost of investment and the comment of project at various points of time

Decision rule
After ranking various investments proposals on basis on net present value, projects with negative net present value (net present value of cash inflows less than their original costs) are rejected and projects with positive NPV are considered acceptable. In case of mutually exclusive alternative projects, projects with higher net present value are selected. Net present value method is suitable for evaluating projects where cash flows are uneven.

Merits
1. The most significant advantage is that it explicitly recognizes the time value of money, e.g., total cash flows pertaining to two machines are equal but the net present value are different because of differences of pattern of cash streams. The need for recognizing the total value of money is thus satisfied.

2. It also fulfills the second attribute of a sound method of appraisal. In that it considers the total benefits arising out of proposal over its life time.

3. It is particularly useful for selection of mutually exclusive projects.

4. This method of asset selection is instrumental for achieving the objective of financial management, which is the maximization of the shareholder's wealth. In brief the present value method is a theoretically correct technique in the selection of investment proposals.

Demerits
1. It is difficult to calculate as well as to understand and use, in comparison with payback method or average return method.

2. The second and more serious problem associated with present value method is that it involves calculations of the required rate of return to discount the cash flows. The discount rate is the most important element used in the calculation of the present value because different discount rates will give different present values. The relative desirability of a proposal will change with the change of discount rate. The importance of the discount rate is thus obvious. But the calculation of required rate of return pursuits serious problem. The cost of capital is generally the basis of the firm's discount rate. The calculation of cost of capital is very complicated. In fact there is a difference of opinion even regarding the exact method of calculating it.

3. Another shortcoming is that it is an absolute measure. This method will accept the project which has higher present value. But it is likely that this project may also involve a larger initial outlay. Thus, in case of projects involving different outlays, the present value may not give dependable results.

4. The present value method may also give satisfactory results in case of two projects having different effective lives. The project with a shorter economic life is preferable, other things being equal. It may be that, a project which has a higher present value may also have a larger economic life, so that the funds will remain invested for longer period while the alternative proposal may have shorter life but smaller present value. In such situations the present value method may not reflect the true worth of alternative proposals. This method is suitable for evaluating projects whose capital outlays or costs differ significantly.

Internal rate of return method
The technique is also known as yield on investment, marginal efficiency value of capital, marginal productivity of capital, rate of return, time adjusted rate of return and so on. Like net present value, internal rate of return method also considers the time value of money for discounting the cash streams. The basis of the discount factor however, is difficult in both cases. In the net present value method, the discount rate is the required rate of return and being a predetermined rate, usually cost of capital and its determinants are external to the proposal under consideration. The internal rate of return on the other hand is based on facts which are internal to the proposal. In other words, while arriving at the required rate of return for finding out the present value of cash flows, inflows and outflows are not considered. But the IRR depends entirely on the initial outlay and cash proceeds of project which is being evaluated for acceptance or rejection. It is therefore appropriately referred to as internal rate of return. The IRR is usually, the rate of return that a project earns. It is defined as the discount rate which equates the aggregate present value of net cash inflows (CFAT) with the aggregate present value of cash outflows of a project. In other words it is that rate which gives the net present value zero. IRR is the rate at which the total of discounted cash inflows equals the total of discounted cash outflows (the initial cost of investment). It is used where the cost of investment and its annual cash inflows are known but the rate of return or discounted rate is not known and is required to be calculated.

Accept / Reject decision
The use of IRR as a criterion to accept capital investment decision involves a comparison of actual IRR with required rate of return, also known as cut off rate or hurdle rate. The project should qualify to be accepted if the internal rate of return exceeds the cut off rate. If the internal rate of return and the required rate of return be equal, the firm is indifferent as to accept or reject the project. In case of mutually exclusive or alternative projects, the project which has the highest IRR will be selected provided its IRR is more than the cut off rate. In case there are budget constraints, the projects are ranked in descending order of their IRR and are selected subject to provisions.

Evaluation of IRR
1. Is a theoretically correct technique to evaluate capital expenditure decision. It possesses the advantages which are offered by the NPV criterion such as, it considers the time value of money and takes into account the total cash inflows and outflows.

2. In addition, the IRR is easier to understand. Business executives and non-technical people understand the concept of IRR much more readily than they understand the concept of NPV. For instance, Business X will understand the investment proposal in a better way if it is said that the total IRR of Machine B is 21% and cost of capital is 10% instead of saying that NPV of Machine B is Rs. 15,396.

3. It itself provides a rate of return which is indicative of profitability of proposal. The cost of capital enters the calculation later on.

4. It is consistent with overall objective of maximizing shareholders wealth. According to IRR, the acceptance / rejection of a project is based on a comparison of IRR with required rate of return. The required rate of return is the minimum rate which investors expect on their investment. In other words, if the actual IRR of an investment proposal is equal to the rate expected by the investors, the share prices will remain unchanged. Since, with IRR, only such projects are accepted which have IRR of the required rate, therefore, the share prices will tend to rise. This will naturally lead of maximization of shareholders wealth.

The IRR suffers from serious limitations:
1. It involves tedious calculations. It involves complicated computation problems.

2. It produces multiple rates which can be confusing. This situation arises in the case of non-conventional projects.

3. In evaluating mutually exclusive proposals, the project with highest IRR would be picked up in exclusion of all others. However in practice it may not turn out to be the most profitable and consistent with the objective of the firm i.e., maximization of shareholders wealth.

4. Under IRR, it is assumed that all intermediate cash flows are reinvested at the IRR. It is rather ridiculous to think that the same firm has the ability to reinvest the cash flows at different rates. The reinvestment rate assumption under the IRR is therefore very unrealistic. Moreover it is not safe to assume always that intermediate cash flows from the project may be reinvested at all. A portion of cash inflows may be paid out as dividends, a portion may be tied up with current assets such as stock, cash, etc. Clearly, the firm will get a wrong picture of the project if it assumes that it invests the entire intermediate cash proceeds.

Further it is not safe to assume that they will be reinvested at the same rate of return as the company is currently earning on its capital (IRR) or at the current cost of capital (k).

NPV versus IRR
NPV indicates the excess of the total present value of future returns over the present value of investments. IRR (or DFC rate) indicates on the other hand the rate at which the cash flows (at present values) are generated in the business by a particular project.

Both NPV and IRR iron out the difference due to interest factor or say higher returns in earlier years and higher returns in later years (though the total returns in absolute terms may be around the same for several projects).

Between the two, IRR or DFC rate is the more sophisticated method - a popular as well, since:
(a) IRR method - mostly subjective decision regarding discounting rate.

(b) Whilst under NPV the main basis of comparison is between different NPV's of different projects, under IRR or DFC rate approach a number of basis is available. For example -
  DFC rate Vs Discount rate of return (on normal operations)
  DFC rate Vs Cut off rate of the company
  DFC rate Vs Borrowing rate (on cost of capital)
  DFC rates between different projects

(c) The results under DFC rate approach are simpler for the management to understand and appreciate. We should however be very careful in applying the decision rules properly when NPV and IRR calculation shows divergent results. The rules are -
    (i) the projects be the basis of decision when mutually exclusive in character;
    (ii) there is capital rationing situation

(d) IRR should be a better guide when there are plenty of project situations (as it is there in a long enterprise) and no major constraints (for example, in respect of macro projects).