Question

1. The director of sport marketing of your organization asks for your advice regarding sponsorship deals she is contemplating. She has to choose between the following: (1) a 15-year sponsorship paying $100,000 per year; (2) a 15-year sponsorship initially paying $75,000 per year and increasing 5% each year; and (3) a 15-year sponsorship initially paying $45,000 per year, but increasing 12% each year. Based on this information, address the following:
   1. Determine the value of each year for each proposal, as well as the total value of each proposal. Hint: you should have a table that has 3 columns (one for each proposal) and is 16 rows high (one for each of the 15 years and one at the bottom that is a total of all 15 years).
   2. Which proposal should the marketing director choose and why?

Answer 1

A-
Year	proposal 1		Proposal 2		Proposal 3
1	100000		75000		45000
2	100000	75000*1.05^1	78750	45000*1.12^1	50400
3	100000	75000*1.05^2	82687.5	45000*1.12^2	56448
4	100000	75000*1.05^3	86821.875	45000*1.12^3	63221.76
5	100000	75000*1.05^4	91162.9688	45000*1.12^4	70808.37
6	100000	75000*1.05^5	95721.1172	45000*1.12^5	79305.38
7	100000	75000*1.05^6	100507.173	45000*1.12^6	88822.02
8	100000	75000*1.05^7	105532.532	45000*1.12^7	99480.66
9	100000	75000*1.05^8	110809.158	45000*1.12^8	111418.3
10	100000	75000*1.05^9	116349.616	45000*1.12^9	124788.5
11	100000	75000*1.05^10	122167.097	45000*1.12^10	139763.2
12	100000	75000*1.05^11	128275.452	45000*1.12^11	156534.7
13	100000	75000*1.05^12	134689.224	45000*1.12^12	175318.9
14	100000	75000*1.05^13	141423.686	45000*1.12^13	196357.2
15	100000	75000*1.05^14	148494.87	45000*1.12^14	219920.1
total value of each proposal	1500000		1618392.27		1677587
B-
Marketing director will choose proposal 3 as it would results in maximum value of 1677587 which is greater than the total value of other proposals like the total value of proposal 1 is 1500000 and proposal 2 is 1618392.27