Supervenes is a freight delivery company, it uses the internal rate of return (IRR) to select projects. The treasurer was presented with an opportunity to invest in project Sigma which requires an initial investment of $20,000 and generates cash inflows of $8,000 per year for 5 years. The cost of capital is 10%. Required: Calculate the IRR for the Sigma project and advice if the project should be taken. The full calculation must be shown for marks.

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Q: OCF

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A: Formulas:

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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.