Replacing old equipment at an immediate cost of $70,000 and an additional outlay of ​$20,000 three years from now will result in savings of ​$16,000 per year for 8 years. The required rate of return is 10​% compounded annually. Compute the net present value and determine if the investment should be accepted or rejected according to the net present value criterion.

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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.