QUESTION 107 An online retail company is launching an advertising campaign. The initial cost will be $700,000 for planning and an annual cost of $30,000 per year for the first 5 years. It is expected that through this campaign, the market share will increase and result in an increase in revenues permanently by $50,000 per year. In additional, the immediate effect of this campaign will generate additional revenues for the first 5 years in the pattern of an arithmetic gradient with $120,000 in the first year, declining by $30,000 per year to zero in the fifth year. Estimate the IRR of this campaign project. IRR is between 4% and 5% O IRR is between 8% and 9% IRR is between 11% and 12% O IRR is between 13% and 14% O IRR is between 15% and 20%
QUESTION 107 An online retail company is launching an advertising campaign. The initial cost will be $700,000 for planning and an annual cost of $30,000 per year for the first 5 years. It is expected that through this campaign, the market share will increase and result in an increase in revenues permanently by $50,000 per year. In additional, the immediate effect of this campaign will generate additional revenues for the first 5 years in the pattern of an arithmetic gradient with $120,000 in the first year, declining by $30,000 per year to zero in the fifth year. Estimate the IRR of this campaign project. IRR is between 4% and 5% O IRR is between 8% and 9% IRR is between 11% and 12% O IRR is between 13% and 14% O IRR is between 15% and 20%
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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Transcribed Image Text:QUESTION 10
An online retail company is launching an advertising campaign. The initial cost will be $700,000 for
planning and an annual cost of $30,000 per year for the first 5 years. It is expected that through this
campaign, the market share will increase and result in an increase in revenues permanently by
$50,000 per year. In additional, the immediate effect of this campaign will generate additional revenues
for the first 5 years in the pattern of an arithmetic gradient with $120,000 in the first year, declining by
$30,000 per year to zero in the fifth year. Estimate the IRR of this campaign project.
O IRR is between 4% and 5%
IRR is between 8% and 9%
O IRR is between 11% and 12%
O IRR is between 13% and 14%
O IRR is between 15% and 20%
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