You are the manager in charge of global operations at BankGlobal – a large commercial bank that operates in a number of countries around the world. You must decide whether or not to launch a new advertising campaign in the U.S. market. Your accounting department has provided the accompanying statement, which summarizes the financial impact of the advertising campaign on U.S. operations. In addition, you recently received a call from a colleague in charge of foreign operations, and she indicated that her unit would lose $8 million if the U.S. advertising campaign were launched. Your goal is to maximize BankGlobal's value. Pre-Advertising Campaign Post-Advertising Campaign Total Revenues $18,610,900 $31,980, 200 Variable Cost TV Airtime 5,750,350 8,610,400 Ad development labor Total variable costs 1,960,580 3,102,450 7,710,930 11,712,850 Direct Fixed Cost Depreciation - computer equipment 1,500,000 1,500,000 Total direct fixed cost 1,500,000 1,500,000 Indirect Fixed Cost Managerial salaries Office supplies 8,458,100 2,003,500 8,458,100 2,003,500 Total indirect fixed cost $10,461,600 $10,461,600 Should you launch the new campaign? Explain.

You are the manager in charge of global operations at BankGlobal – a large commercial bank that operates in a number of countries around the world. You must decide whether or not to launch a new advertising campaign in the U.S. market. Your accounting department has provided the accompanying statement, which summarizes the financial impact of the advertising campaign on U.S. operations. In addition, you recently received a call from a colleague in charge of foreign operations, and she indicated that her unit would lose $8 million if the U.S. advertising campaign were launched. Your goal is to maximize BankGlobal's value. Pre-Advertising Campaign Post-Advertising Campaign Total Revenues $18,610,900 $31,980, 200 Variable Cost TV Airtime 5,750,350 8,610,400 Ad development labor Total variable costs 1,960,580 3,102,450 7,710,930 11,712,850 Direct Fixed Cost Depreciation - computer equipment 1,500,000 1,500,000 Total direct fixed cost 1,500,000 1,500,000 Indirect Fixed Cost Managerial salaries Office supplies 8,458,100 2,003,500 8,458,100 2,003,500 Total indirect fixed cost $10,461,600 $10,461,600 Should you launch the new campaign? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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