12. An electric company is considering a proposal to supply power to a small town, Initial capital investment is P18M plus another P25M spread out evenly over a five year period. The project will last for 15years and income generated is expected to be P7.5M per year starting at the end of the fourth year. Determine the feasibility of the proposal using the ERR method with a 14% MARR and a 15% reinvestment rate. (Ans. Proposal is not feasible, 13%)

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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.