A firm is evaluating its two independent projects, L (22) and W(34) for this year’s capital budgeting . The firm’s cost of capital or the required rate of return is 14%. The net incremental cash flows after tax for both the projects are as follows:       Outflows Inflows Projects Year 1 2 3 4 5 L (22) -6,000 2,000 2,000 2,000 2,000 4,000 W (34) -18,000 5,600 5,600 5,600 5,600 6,600   Required: Calculate for each project:   Payback Period IRR NPV PI   Give your decision regarding acceptation and rejection of the project and explain your basis for the decision.

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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.