The cash flows associated with a Death Valley County arroyo improvement project are as follows: initial cost $650,000; life 20 years; annual maintenance cost $150,000 per year; benefits $600,000 per year; disbenefits $190,000 per year. The discount rate is 6% per year. Determine if the project is justified using (a) the conventional B/C ratio, and (b) the modified B/C ratio.

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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.