Consider a public project with a forecast period of 20 years. The discount rate is 3.5%. The net benefit in year 20 is forecast to be 10. You expect that each year from year 20, conditional on making it to year t≥20, there is only an 80% chance of continuing another year. Net benefits grow 2% per year as long as the project continues. a) What is the discount factor (δ)  b) What is the horizon value?

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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.