Exercise 16-36 Payback Period; Uneven Cash Flows (Section 3) (LO 16-1, 16-6, 16-8) Alleglence Insurance Company's management is considering an advertising program that would require an $180,395 and bring in additional sales over the next five years. The projected additional sales revenue in yea associated expenses of $29,500. The additional sales revenue and expenses from the advertising program by 10 percent each year. Alleglence's tax rate is 30 percent. (Hint: The $180,395 advertising cost is an expen 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. (Rou calculations and final answer to the nearest whole dollar) 1. Payback period 2 Net present value years
Exercise 16-36 Payback Period; Uneven Cash Flows (Section 3) (LO 16-1, 16-6, 16-8) Alleglence Insurance Company's management is considering an advertising program that would require an $180,395 and bring in additional sales over the next five years. The projected additional sales revenue in yea associated expenses of $29,500. The additional sales revenue and expenses from the advertising program by 10 percent each year. Alleglence's tax rate is 30 percent. (Hint: The $180,395 advertising cost is an expen 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. (Rou calculations and final answer to the nearest whole dollar) 1. Payback period 2 Net present value 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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![Exercise 16-36 Payback Period; Uneven Cash Flows (Section 3) (LO 16-1, 16-6, 16-8)
Alleglence Insurance Company's management is considering an advertising program that would require an initial expenditure of
$180,395 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $84,000, with
associated expenses of $29,500. The additional sales revenue and expenses from the advertising program are projected to increase
by 10 percent each year. Alleglence's tax rate is 30 percent. (Hint: The $180,395 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. Payback period
2. Net present value
years
A](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F53c58b21-440e-48f6-9990-887e7bafda20%2Fbb826f7d-5524-4929-9e6d-0d22c16d14c9%2F0wpdlm2_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 16-36 Payback Period; Uneven Cash Flows (Section 3) (LO 16-1, 16-6, 16-8)
Alleglence Insurance Company's management is considering an advertising program that would require an initial expenditure of
$180,395 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $84,000, with
associated expenses of $29,500. The additional sales revenue and expenses from the advertising program are projected to increase
by 10 percent each year. Alleglence's tax rate is 30 percent. (Hint: The $180,395 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. Payback period
2. Net present value
years
A
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