Staple Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Beans Project Rice Initial investment Annual net income Net annual cash flow Estimated useful life Salvage value Periods 5 6 9% 3.890 4.486 10% The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 12% 3.791 $400,000 4.355 20,000 100,000 5 years -0- 11% 3.696 4.231 $600,000 42,000 The net present value for Project Rice is 142,000 6 years 3.605 -0- 4.111

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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.