Project Alpha requires an immediate investment of $16,000 and an additional investment of $12,000 in three years. Net returns are estimated to be $8,000 after two years, $24,000 after four years, and $18,000 after seven years. Project Omega requires an immediate investment of $8,000, an additional investment of $12,000 after two years and $8,000 after six years. Net returns are estimated to be $6,800 annually at the end of each year for seven years. The cost of capital is 10%. Required: Determine which project is preferable using the net present value criterion.

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A: Calculation of Payback Period:Using Excel Spreadsheet:

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A:

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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.