Stock-X is evaluating two mutually exclusive projects. Project A has a net investment of $48,000 and net cash flows over a six-year period of $12,500 per year (that is reinvestment with the same cost and cash flow for another six years). Project B also has a net investment of $48,000, but its net cash flows of $8,640 per year will occur over a 12-year period. If Stock-X has a cost of capital of 14% for these projects, which project, if either, should be chosen, and what is its NPV?

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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.