Consider the following two mutually exclusive projects: Year   Cash Flow (X)       Cash Flow (Y) 0          -$365,000             -$38,000 1                25,000                16,000 2                65,000                12,000 3                65,000                17,000 4              425,000                15,000 Whichever project you choose, if any, you require a 13 percent return on your investment. i. Which investment will you choose if you use the payback decision criteria? Justify your answer. ii. Which investment will you choose if you use the NPV decision criteria? Justify your answer. iii. Which project will you choose ultimately based on your answers above?

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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.