Question 2:Bunnings Ltd is considering to invest in one of the two following projectsto buy a new equipment. Each equipment will last 5 years and have no salvage value at the end. The company’s required rate of return for all investment projects is 8%. The cash flows of the projects are provided below.   Equipment 1 Equipment 2 Cost $186,000 $195,000 Future Cash  FlowsYear 1Year 2Year 3Year 4Year 5 Year     86 000 93 000 83 000 75 000 55 000     97 000 84 000 86 000 75 000 63 000 Required: a)Identify which option of equipment should the company accept based on Profitability Index? b)Identify which option of equipment should the company accept based on discountedpay back method if the payback criteria is maximum 2 years?

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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.