A corporation is considering purchasing amachine that will save $150,000 per year beforetaxes. The cost of operating the machine (includingmaintenance) is $30,000 per year. The machine willbe needed for five years, after which it will have azero salvage value. MACRS depreciation will beused, assuming a three-year class life. The marginalincome tax rate is 40%. If the firm wants 15% returnon investment after taxes, how much can it afford topay for this machine?

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Q: what is the NPV of this project?

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A:

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.