An investment of $40,000 today is expected to give rise to annual contribution of $25,000. This is based on selling one product, a volume of 10,000 units, selling price of $12.50 and variable cost of $10. Annual fixed cost of $10,000 will be incurred for the next four years; the discount rate is 10%. Required: (a) Calculate the NPV of this investment. (b) Calculate the sensitivity of your calculation to the following: i. Initial investment ii. Selling price per unit iii. Variable cost per unit iv. Sales volume v. Fixed costs vi. Discount rate

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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.