The Unique Bookshelf Company is considering the purchase of a custom delivery van costing approximately K50,000. Using a discount rate of 20%, the present value of future cost savings is estimated at K51,200. Use the principles of investment appraisal to determine the amount by which the actual cost of the van should not exceed the K50,000 in order to yield the 20% return.

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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.