EX Algo Payback Period; Uneven Cash Flows Section LO
Allegience Insurance Company's management is considering an advertising program that would require an initial
expenditure of $ and bring in additional sales over the next five years. The projected additional sales
revenue in year is $ with associated expenses of $ The additional sales revenue and expenses
from the advertising program are projected to increase by percent each year. Allegience's tax rate is percent.
Hint: The $ advertising cost is an expense.
Use Appendix A for your reference.
Note: Use appropriate factors from the tables provided.
Required:
Compute the payback period for the advertising program.
Calculate the advertising program's net present value, assuming an aftertax hurdle rate of percent.
Note: Round your intermediate calculations and final answer to the nearest whole dollar.
