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    Question

    A company is thinking whether to buy a new machine or

    build a new machine itself in the factory. The following information is available about the two projects: A.     NPV of buying new machine = Rs. 23,000 B.     NPV of building new machine = Rs. 61,000 The company should accept which of these two projects?
    A Only A Correct Answer Incorrect Answer
    B Either A or B Correct Answer Incorrect Answer
    C Neither A or B Correct Answer Incorrect Answer
    D Only B Correct Answer Incorrect Answer
    E Can not be determined Correct Answer Incorrect Answer

    Solution

    We should the project with higher NPV. Higher NPV helps in maximizing the wealth of shareholders.

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