YOUR UNDERSFANDING Directions: Evaluate the following projects. Which is the best among them using the different tools in capital budgeting? Use the following tools to make your Project Cash outlay А decisions: P880,000 200,000 P1,000,000 P920,000 1. Payback period 2. Net present value 3. Accounting rate of return 4. Profitability index Net Cash inflow Year 1 310,000 290,000 280,000 300,000 Year 2 310,000 220,000 Year 3 310,000 250,000 Year 4 310,000 180,000 250,000 295,000 Year 5 310,000 90,000 Year 6 310,000 90,000 195,000 Salvage value 70,000 80,000 Discount rate 10% 8% 12% Economic life 4 years 5 years 6 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.