What is the Year-0 net cash flow?  What are the net operating cash flows in Years 1, 2, and 3?   What is the additional Year-3 cash flow (i.e., the after-tax salvage and the return of working capital)?  If the project’s cost of capital is 12%, should the machine be purchased?

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A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

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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.