Calculate the payback period for each of the following mutually exclusive projects, then comment on the advisability of selection based on the payback period criterion and compare the selecting suggestion with NPV method : Project A has a cost of $15,000, returns $4,000 after-tax the first year with this amount increasing by $1,000 annually over a 5-year life; Project B costs $15,000 and returns $13,000 after-tax the first year, followed by 4 years of $2,000 per year. The firm uses a 10% 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.