An investment of $450,000 is made in equipment that qualifies as 5-year equipment for MACRS-GDS depreciation. The then-current dollar before tax cash flows are given by a $50,000 increasing gradient series, with the cash flow the first year equaling $100,000. In addition, a $50,000  hencurrent salvage value occurs at the end of the 5-year planning horizon. A 25% tax rate and 4% inflation rate apply. The real ATMARR is 8%. Solve, a. Determine the after-tax cash flows, in constant dollars, for each year. b. Determine the present worth for the investment. c. Determine the real internal rate of return for the investment.

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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.