Chandler Tire Co. is trying to decide which one of two projects it should accept. Both projects have the same start-up costs. Project 1 will produce annual cash flows of $52 000 a year for six years. Project 2 will produce cash flows of $48 000 a year for eight years. The company requires a 15% return. Which project should the company select and why? a. Project 1; because the annual cash flows are greater than those of Project 2. b. Project 1; because the present value of its cash inflows exceeds those of Project 2 by $14 211.62. c. Project 2; because the total cash inflows are $70 000 greater than those of Project 1. d. Project 2; because the present value of the cash inflows exceeds those of Project 1 by $18 598.33.

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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.