The Northern Investment Group is considering investing $2.5 million in a new shopping plaza in Atlanta. The company has estimated that the shopping plaza, once built, will generate $500,000 per year for 10 years. If the firm is looking for a return of 12% on its investment, is it worth undertaking? Assume that the shopping plaza will retain about 60% of its initial investment as salvage value.

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A: YEAR CASH FLOW  COST OF CAPITAL 12% 0 300000 1 450000 2 710000

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Q: investment

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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.