A firm plans to invest in a new project that will last for four years and will generate revenues of $1,000,000 in year one, $1,300,000 in year two, $1,500,000 in year three and $1,250,000 in year four.  The investment in Net Working Capital needs to be 15% of the revenue in the following time period.  What is the cash flow from changes in Net Working Capital in year three?

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A: Initial cost-$13,700YearCash flow1$5,000.002$1,127.003$0.004$5,240.005$6,240.006$1,363.40

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A:

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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.