Krishna India owns an oil pipeline which will generate Rs. 12 crore of cash income in the coming year. It has a very long life with virtually negligible operating cost. The volumeof shipped, however, will decline over time and, hence, cash flows will decrease by 3% per year. The Discount rate is 12%. a. If the pipeline is used forever, what is the present value of its cash flows? b. If the pipeline is scraped after 25 years, what is the present value of its cashflows?

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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.