Market Top Investors, Inc., is considering the purchase of a $345,000 computer with an economic life of four years. The computer will be fully depreciated over four years using the straight-line method, at which time it will be worth $96,000. The computer will replace two office employees whose combined annual salaries are $92,000. The machine will also immediately lower the firm’s required net working capital by $81,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 21 percent. The appropriate discount rate is 10 percent.    Calculate the NPV of this project.    Is it worthwhile to buy the computer?   No Yes

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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.