Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of $182,050 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $85,000, with associated expenses of $30,000. 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 $182,050 advertising cost is an expense.) Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Compute the payback period for the advertising program. 2. Calculate the advertising program's net present value, assuming an after-tax hurdle rate of 10 percent. (Round your intermediate calculations and final answer to the nearest whole dollar.) 1. 2. X Answer is complete but not entirely correct. Payback period Net present value 3 $ 49,209 X years
Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of $182,050 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $85,000, with associated expenses of $30,000. 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 $182,050 advertising cost is an expense.) Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Compute the payback period for the advertising program. 2. Calculate the advertising program's net present value, assuming an after-tax hurdle rate of 10 percent. (Round your intermediate calculations and final answer to the nearest whole dollar.) 1. 2. X Answer is complete but not entirely correct. Payback period Net present value 3 $ 49,209 X years
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of
$182,050 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $85,000, with
associated expenses of $30,000. 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 $182,050 advertising cost is an expense.)
Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)
Required:
1. Compute the payback period for the advertising program.
2. Calculate the advertising program's net present value, assuming an after-tax hurdle rate of 10 percent. (Round your intermediate
calculations and final answer to the nearest whole dollar.)
1.
2.
> Answer is complete but not entirely correct.
Payback period
Net present value
3✔ years
$ 49,209 X](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F292dc837-29a4-4057-937d-0920048b7b19%2F7bd1c455-6bcf-4a95-8a04-4d3ae6adf241%2F6gt1rwp_processed.png&w=3840&q=75)
Transcribed Image Text:Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of
$182,050 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $85,000, with
associated expenses of $30,000. 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 $182,050 advertising cost is an expense.)
Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)
Required:
1. Compute the payback period for the advertising program.
2. Calculate the advertising program's net present value, assuming an after-tax hurdle rate of 10 percent. (Round your intermediate
calculations and final answer to the nearest whole dollar.)
1.
2.
> Answer is complete but not entirely correct.
Payback period
Net present value
3✔ years
$ 49,209 X
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