An advertising campaign will cost $305,000 for planning and $50,000 in each of the next six years. It is expected to increase revenues permanently by $50,000 per year. Additional revenues will be gained in the pattern of an arithmetic gradient with $20,000 in the first year, declining by $5,000 per year to zero in the fifth year. What is the IRR of this investment? If the company's MARR is 8 percent, is this a good investment? The 19t is (17 percent, which is greater than or equal to the MARR, so the advertising campaign is a good investment (Round to one decimal place as needed)
An advertising campaign will cost $305,000 for planning and $50,000 in each of the next six years. It is expected to increase revenues permanently by $50,000 per year. Additional revenues will be gained in the pattern of an arithmetic gradient with $20,000 in the first year, declining by $5,000 per year to zero in the fifth year. What is the IRR of this investment? If the company's MARR is 8 percent, is this a good investment? The 19t is (17 percent, which is greater than or equal to the MARR, so the advertising campaign is a good investment (Round to one decimal place as needed)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:An advertising campaign will cost $305,000 for planning and $50,000 in each of the next six years. It is expected to increase revenues permanently by $50,000 per year. Additional revenues will be
gained in the pattern of an arithmetic gradient with $20,000 in the first year, declining by $5,000 per year to zero in the fifth year. What is the IRR of this investment? If the company's MARR is 8
percent, is this a good investment?
The IRR is (17 percent, which is greater than or equal to the MARR, so the advertising campaign is a good investment
(Round to one decimal place as needed.)
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