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$$s tax rate is $30$ percent. $($Hint: The $$193,635$ advertising cost is an expense.$)$

Use Appendix A for your reference.

Note: Use appropriate factor$($s$)$ from the tables provided.

Required:

Compute the payback period for the advertising program.

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.

Future Value and Present Value Tables

Table I

Future Value of $$1\mathrm{.}00(1+$ r$)$nn

Period $4\%6\%8\%10\%12\%14\%20\%$

$11\mathrm{.}0401\mathrm{.}0601\mathrm{.}0301\mathrm{.}1001\mathrm{.}1201\mathrm{.}1401\mathrm{.}200$

$21\mathrm{.}0821\mathrm{.}1241\mathrm{.}1661\mathrm{.}2101\mathrm{.}2541\mathrm{.}3001\mathrm{.}440$

$3$ l$\mathrm{.}1251\mathrm{.}1911\mathrm{.}2601\mathrm{.}3311\mathrm{.}4051\mathrm{.}4821\mathrm{.}728$

$41\mathrm{.}1701\mathrm{.}2631\mathrm{.}3611\mathrm{.}4641\mathrm{.}5741\mathrm{.}6892\mathrm{.}074$

$51\mathrm{.}2171\mathrm{.}3381\mathrm{.}4691\mathrm{.}61$l $1\mathrm{.}7621\mathrm{.}9252\mathrm{.}488$

$61\mathrm{.}2651\mathrm{.}4191\mathrm{.}5871\mathrm{.}7721\mathrm{.}9742\mathrm{.}1952\mathrm{.}986$

$71\mathrm{.}3161\mathrm{.}5041\mathrm{.}7141\mathrm{.}9492\mathrm{.}2112\mathrm{.}5023\mathrm{.}583$

$81\mathrm{.}3691\mathrm{.}5941\mathrm{.}8512\mathrm{.}1442\mathrm{.}4762\mathrm{.}8534\mathrm{.}300$

$91\mathrm{.}4231\mathrm{.}690$ l$\mathrm{.}9992\mathrm{.}3592\mathrm{.}7733\mathrm{.}2525\mathrm{.}160$

$10$ l$\mathrm{.}4801\mathrm{.}7912\mathrm{.}1592\mathrm{.}5943\mathrm{.}1063\mathrm{.}7076\mathrm{.}192$

$111\mathrm{.}5401\mathrm{.}8982\mathrm{.}3322\mathrm{.}8533\mathrm{.}4794\mathrm{.}2267\mathrm{.}430$

$121\mathrm{.}6012\mathrm{.}0122\mathrm{.}5133\mathrm{.}1393\mathrm{.}8964\mathrm{.}8188\mathrm{.}916$

$13$ l$\mathrm{.}6652\mathrm{.}1332\mathrm{.}7203\mathrm{.}4524\mathrm{.}3645\mathrm{.}49210\mathrm{.}699$

$14$ l$\mathrm{.}7322\mathrm{.}2612\mathrm{.}9373\mathrm{.}7984\mathrm{.}8876\mathrm{.}26112\mathrm{.}839$

$151\mathrm{.}8012\mathrm{.}3973\mathrm{.}1724\mathrm{.}1775\mathrm{.}4747\mathrm{.}13815\mathrm{.}407$

$202\mathrm{.}1913\mathrm{.}2074\mathrm{.}6616\mathrm{.}7239\mathrm{.}64613\mathrm{.}74338\mathrm{.}338$

$303\mathrm{.}2435\mathrm{.}74410\mathrm{.}06317\mathrm{.}45029\mathrm{.}96050\mathrm{.}950237\mathrm{.}380$

$404\mathrm{.}30110\mathrm{.}28621\mathrm{.}72545\mathrm{.}26093\mathrm{.}051188\mathrm{.}8801,469\mathrm{.}300$

Table II

Future Value of a Series of $$1\mathrm{.}00$ Cash Flows $($Ordinary Annuity$)(((1+$r$)$nn $1)-$: r$)$

Period $4\%6\%8\%10\%12\%14\%20\%$

$11\mathrm{.}0001\mathrm{.}0001\mathrm{.}000$ l$\mathrm{.}0001\mathrm{.}0001\mathrm{.}0001\mathrm{.}000$

$22\mathrm{.}0402\mathrm{.}0602\mathrm{.}0802\mathrm{.}1002\mathrm{.}1202\mathrm{.}1402\mathrm{.}220$

$33\mathrm{.}1223.1843\mathrm{.}2463\mathrm{.}3103\mathrm{.}3743\mathrm{.}4403\mathrm{.}640$

$44\mathrm{.}2474\mathrm{.}3754\mathrm{.}5064\mathrm{.}6414\mathrm{.}7794\mathrm{.}9215\mathrm{.}368$

$55\mathrm{.}4165\mathrm{.}6375\mathrm{.}8676\mathrm{.}1056\mathrm{.}3536\mathrm{.}6107\mathrm{.}442$

$66\mathrm{.}6336\mathrm{.}9757\mathrm{.}3367\mathrm{.}7168\mathrm{.}1158\mathrm{.}5369\mathrm{.}930$

$77\mathrm{.}8988\mathrm{.}3948\mathrm{.}9239\mathrm{.}48710\mathrm{.}08910\mathrm{.}73012\mathrm{.}916$

$89\mathrm{.}2149\mathrm{.}898$ I$0\mathrm{.}637$ Il$\mathrm{.}43612\mathrm{.}30013\mathrm{.}23316\mathrm{.}499$

$910\mathrm{.}583$ ll$\mathrm{.}49112\mathrm{.}48813\mathrm{.}58014\mathrm{.}77616\mathrm{.}08520\mathrm{.}799$

$1012\mathrm{.}00613\mathrm{.}18114\mathrm{.}48715\mathrm{.}93817\mathrm{.}54919\mathrm{.}33725\mathrm{.}959$

$1113\mathrm{.}48614\mathrm{.}97216\mathrm{.}64618\mathrm{.}53120\mathrm{.}65523\mathrm{.}04532\mathrm{.}150$

$1215\mathrm{.}02616\mathrm{.}87018\mathrm{.}97721\mathrm{.}38524\mathrm{.}13327\mathrm{.}27139\mathrm{.}580$

$1316\mathrm{.}62718\mathrm{.}88221\mathrm{.}49524\mathrm{.}52328\mathrm{.}02932\mathrm{.}08948\mathrm{.}497$

$1418\mathrm{.}29221\mathrm{.}01524\mathrm{.}21527\mathrm{.}97632\mathrm{.}39337\mathrm{.}58159\mathrm{.}196$

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