(LO 16-1, 16-6, 16-8) Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of $172,120 and bring in additional sales over the next five years. The projected additional sales revenue in y 1 is $79,000, with associated expenses of $27,000. 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 $172,120 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.)

(LO 16-1, 16-6, 16-8) Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of $172,120 and bring in additional sales over the next five years. The projected additional sales revenue in y 1 is $79,000, with associated expenses of $27,000. 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 $172,120 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.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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