A company is evaluating the feasibility of investing in machinery to manufacture an automotive component. It would need to make an investment of $550,000 today, after which, it would have to spend $7,500 every year starting one year from now, for twelve years. At the end of the period, the machine would have a salvage value of $13,000. The company confirmed that it can produce and sell 8,450 components every year for twelve years and the net return would be $12.50 per component. The company's required rate of return is 6.00%. a. What is the Net Present Value (NPV) of this investment option?  b. Is the investment option feasible? Yes No

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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.