An engineering firm invested capital of 6,000,000 dollars on equipment that ensures a revenue of 2,900,000  dollars each year for five his equipment, with a life of five years, will have a trade-in value of 600,000 dollars. The cost of operation and maintenance will be 1,200,000 dollars per year. Taxes and insurance will be 2% of the first cost per year. He expects his capital will earn not less than 15%. Is the investment justifiable? Solve by using the Future Worth Method.

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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.