Ferguson Company is considering an investment in computer-aided design equipment. The equipment will cost $110,000 and will have a five-year useful economic life. It has a salvage value of $10,000. The expected annual operating costs for the equipment would be $20,000 for the first two years and $25,000 for the remaining three years. Assuming that Ferguson's desired return on its investment (MARR) is 15%, what is required annual savings to make the investment worthwhile?

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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.