Binaan Teguh Berhad (BTB) has two potential projects, Project A and Project B. The forecasted cash flows and relevant information of the two projects are given below. Cash Flow (forecasted) (RM’ million) Year Project A 50 Project B 60 1 2 80 40 3 80 40 4 90 20 The internal rate of return (IRR) of Project A and Project B are 12 percent per year and 15 percent per year respectively. Both projects require initial capital in year 0 and having cost of capital of 5 percent per year.

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A:

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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.