A vice president of marketing proposes a new program to significantly increase product sales by 250,000 units per year throughout the 1998-2004 period. Specifically, it is suggested that the company take the following actions:

A. Spend $2.5 million over the period of 1998-2000 as promotional expenditures - for example, spend $1.0 million each in the years 1998, 1999, and $0.5 million in the year 2000.

B. Make a one-time investment of $1.4 million in plants and equipment needed at the beginning of 1998 to generate these additional products. No new warehouse capability is needed. This investment is to be depreciated on a straight-line basis over the seven-year period. There will be no salvage values for these plants and equipment in 2005. It is further assumed that the product unit cost is $8.00 in 1998, and it is estimated to increase by 3 percent per year. The product unit price is $20 in 1998, and it is estimated to change as manifested in the following table:

Items1998 1999 2000 2001 2002 2003 2004

Unit Price$20.00 $20.60 $21.00 $21.15 $21.25 $21.25 $21.00

The SG&A expenditure is estimated at $1.25 million in 1998, and it will increase by 3 percent per year during the six-year period. A corporate tax of 40 percent must be paid for any marginal income. There is an interest charge during this period, and the company's weighted average cost of capital (WACC) is 8 percent.

If the company's hurdle rate for this type of investment is 25 percent, and the NPV (Net Present Value) for the proposed marketing initiative is negative at that hurdle rate of 0.25, why would you not recommend the marketing initiative be approved? Explain in depth.