A surgical device company is proposing a plant expansion for a new product line, that is expected to cost $32 million now and another $8 million 2 years from now. If the total operating costs will be $1.4 million per year starting 1 year from now, and the estimated salvage value of the plant is zero, how much must the company make annually in years 1 through 10 to recover its investment plus a return of 16% per year?

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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.