Project A has the following estimated cash flows and present values: Year                        Cash flow $       Discount factor@ 12%       Present value $ 0   Cost                    (95 000)          1.0                                         (95 000) 1–5 Contribution per annum               50 000             3.605                                    180 250 1–5 Fixed costs per annum               (25 000)           3.605                                    (90 125) 5 Residual value       20 000             0.567                                    11 340   The benefit of using sensitivity analysis in an investment appraisal would be:

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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.