Business, 27.03.2020 21:49 jamiehills399
Allegience Insurance Company’s management is considering an advertising program that would require an initial expenditure of $165,500 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $75,000, with associated expenses of $25,000. The additional sales revenue and expenses from the advertising program are projected to increase by 10 percent each year. Allegience’s tax rate is 30 percent. (Hint: The $165,500 advertising cost is an expense.)
Required:
Compute the payback period for the advertising program.
Calculate the advertising program’s net present value, assuming an after-tax hurdle rate of 10 percent.
Answers: 3
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Allegience Insurance Company’s management is considering an advertising program that would require a...
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