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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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