An investment of $1,250,000 is made in 7-year MACRS-GDS equipment. The investment yields annual before-tax returns of $200,000, plus a salvage value of $500,000 at the end of the 10-year planning horizon. The MARRAT is 7%, the income tax rate is 25%, the maximum Section 179 expense deduction is taken and 50% bonus depreciation applies. For the investment, calculate a. After-tax present worth, b. After-tax annual worth, and c. EVA.

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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.