Question
In: Accounting
Allegience Insurance Company’s management is considering an advertising program that would require an initial expenditure of...
Allegience Insurance Company’s management is considering an
advertising program that would require an initial expenditure of
$165,500 and bring in additional sales over the next five years.
The projected additional sales revenue in year 1 is $75,000, with
associated expenses of $25,000. 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 $165,500 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.)
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Allegience Insurance Company’s management is considering an advertising program that would require an initial expenditure of...
Allegience Insurance Company’s management is considering an
advertising program that would require an initial expenditure of
$165,500 and bring in additional sales over the next five years.
The projected additional sales revenue in year 1 is $75,000, with
associated expenses of $25,000. 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 $165,500 advertising cost is an expense.) Use Appendix A for
your...
Allegience Insurance Company’s management is considering an advertising program that would require an initial expenditure of...
Allegience Insurance Company’s management is considering an
advertising program that would require an initial expenditure of
$193,635 and bring in additional sales over the next five years.
The projected additional sales revenue in year 1 is $92,000, with
associated expenses of $33,500. The additional sales revenue and
expenses from the advertising program are projected to increase by
10 percent each year. Allegience’s tax rate is 40 percent. (Hint:
The $193,635 advertising cost is an expense.) Use Appendix A for
your...
Allegience Insurance Company’s management is considering an advertising program that would require an initial expenditure of...
Allegience Insurance Company’s management is considering an
advertising program that would require an initial expenditure of
$193,635 and bring in additional sales over the next five years.
The projected additional sales revenue in year 1 is $92,000, with
associated expenses of $33,500. The additional sales revenue and
expenses from the advertising program are projected to increase by
10 percent each year. Allegience’s tax rate is 40 percent. (Hint:
The $193,635 advertising cost is an expense.) Use Appendix A for
your...
Allegience Insurance Company’s management is considering an advertising program that would require an initial expenditure of...
Allegience Insurance Company’s management is considering an
advertising program that would require an initial expenditure of
$165,500 and bring in additional sales over the next five years.
The projected additional sales revenue in year 1 is $75,000, with
associated expenses of $25,000. The additional sales revenue and
expenses from the advertising program are projected to increase by
10 percent each year. Allegience’s tax rate is 40 percent.
(Hint: The $165,500 advertising cost is an
expense.)
Use Appendix A for your...
Allegience Insurance Company’s management is considering an advertising program that would require an initial expenditure of...
Allegience Insurance Company’s management is considering an
advertising program that would require an initial expenditure of
$177,085 and bring in additional sales over the next five years.
The projected additional sales revenue in year 1 is $82,000, with
associated expenses of $28,500. 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 $177,085 advertising cost is an expense.)
Use Appendix A for your...
Blossom Company management is considering a project that will require an initial investment of $48,500 and...
Blossom Company management is considering a project that will
require an initial investment of $48,500 and will last for 10
years. No other capital expenditures or increases in working
capital are anticipated during the life of the project. What is the
annual EBIT that will make the project economically viable if the
cost of capital for the project is 8 percent and the firm will
depreciate the investment using straight-line depreciation and a
salvage value of $0? Assume that the...
The manager of Keebee, Inc. is considering a new project that would require an initial investment...
The manager of Keebee, Inc. is considering a new project that
would require an initial investment of $1,197,810. The
cost of capital or the required rate of return of this company is
10 percent. This project will generate an annual cash
inflow of $300,000 in the following five years.
Calculate the net present value (NPV) of this
project. Indicate whether or not this project is
acceptable.
Calculate the internal rate of return (IRR) of this
project.
Cooper Industries is considering a project that would require an initial investment of $101,000. The project...
Cooper Industries is considering a project that would require an
initial investment of $101,000. The project would result in cost
savings of $62,000 in year 1 and $70,000 in year two. What is the
internal rate of return?
A regression analysis relating a company’s sales, their advertising expenditure, price, and time resulted in the...
A regression analysis relating a company’s sales, their
advertising expenditure, price, and time resulted in the
following.
Regression Statistics
Multiple R
0.8800
R Square
0.7744
Adjusted R Square
0.7560
Standard Error
232.29
Observations
25
ANOVA
df
SS
MS
F
Significance F
Regression
3
53184931.86
17728310.62
328.56
0.0000
Residual
21
1133108.30
53957.54
Total
24
54318040.16
Coefficients
Standard Error
t Stat
P-value
Intercept
927.23
1229.86
0.75
0.4593
Advertising (X1)
1.02
3.09
0.33
0.7450
Price (X2)
15.61
5.62
2.78
0.0112
Time (X3)
170.53...
Haroldsen Corporation is considering a capital budgeting project that would require an initial investment of $350,000.
Haroldsen Corporation is considering a capital budgeting project that would require an initial investment of $350,000. The investment would generate annual cash inflows of $133,000 for the life of the project, which is 4 years. At the end of the project, equipment that had been used in the project could be sold for $32,000. The company's discount rate is 14%.
(Note: For accuracy, use the appropriate discount factor(s) using Exhibits 13B-1 and 13B-2)
The net present value of the...
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