Dragon Products Company is considering two projects. The projects’ cash flows are as follows: EXPECTED NET CASH FLOWS YEAR PROJECT A PROJECT B 0 ($10300) (12,500) 1 1700 2870 2 1930 2450 3 2500 4700 4 2800 4575 5 4200 3450 Discount Rate for both pojects = 6.8% REQUIRED 1. Find the Payback Period [PBP] of both projects 2. What is the Discounted PBP of both projects ? 3. Calculate the Net Present Value of the two projects and decide which one is better? 4. What is the profitability index of both products ? What is the function of PI in project selection? 5. What are the IRR of the projects ? Which of the projects is the best using IRR as a criteria? Why? 6. Why is sunk cost not considered when deciding about selecting a project? Which cost is considered and why?

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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.