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Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of $178,740 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $83,000, with associated expenses of $29,000. 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 $178,740 advertising cost is an expense.) Use Appendix A for your reference. Note: 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. Note: Round your Intermediate calculations and final answer to the nearest whole dollar. 1. Payback period 2. Net present value years

Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of $178,740 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $83,000, with associated expenses of $29,000. 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 $178,740 advertising cost is an expense.) Use Appendix A for your reference. Note: 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. Note: Round your Intermediate calculations and final answer to the nearest whole dollar. 1. Payback period 2. Net present value years

Algebra and Trigonometry (6th Edition)
Algebra and Trigonometry (6th Edition)
6th Edition
ISBN:9780134463216
Author:Robert F. Blitzer
Publisher:Robert F. Blitzer
ChapterP: Prerequisites: Fundamental Concepts Of Algebra
Section: Chapter Questions
Problem 1MCCP: In Exercises 1-25, simplify the given expression or perform the indicated operation (and simplify,...
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Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of $178,740 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $83,000, with associated expenses of $29,000. 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 $178,740 advertising cost is an expense.) Use Appendix A for your reference. Note: 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. Note: Round your Intermediate calculations and final answer to the nearest whole dollar. 1. Payback period 2. Net present value years
Transcribed Image Text:Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of $178,740 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $83,000, with associated expenses of $29,000. 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 $178,740 advertising cost is an expense.) Use Appendix A for your reference. Note: 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. Note: Round your Intermediate calculations and final answer to the nearest whole dollar. 1. Payback period 2. Net present value years
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