Question

A financial manager facing a capital budgeting decision must decide whether to

____

Use the primary markets or secondary markets  

Buy new machinery or repair the old junks

Use the money market or capital market

Issue stock securities or debt securities

Answer 1

The Answer is “Buy new machinery or repair the old junks”

- A financial manager facing a capital budgeting decision must decide whether to Buy new machinery or repair the old junks.

- The Main objective of a capital budgeting decision technique is to make a decision with respect to a whether to buy an assets or to make a repair to old assets or the junk assets.

- The most commonly used capital budgeting technique is the Net Present Value [NPV] method. In this NPV method, the investment proposal shall be acceptable if the Net Present Value is positive, or else it rejected

- Net Present Value [NPV] = Present Value of Annual Cash Inflows – Initial Investment