The Philippines’ Bench clothing has just completed a feasibility study of what to do with the 16,000 kg of overruns, rejects, and remnants it produces every year. The company’s CEO launched the feasibility study by asking, why pay someone to dig coal out of the ground and then pay someone else to put our waste into a landfill? Why not just burn our own waste?   The company is proposing to build a P10 million power plant to burn its waste as fuel, thereby saving P2.8 million a year in coal purchases.   Company engineers have determined that the waste burning plant will be environmentally sound, and after its four-year study period the plant can be sold to a local electric utility for $5 million. What is the IRR of this proposed power plant? If the firm’s MARR is 15% per year, should this project be undertaken?

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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.