Allegience Insurance Companys management is considering an advertising program that would require an initial expenditure of $183,705 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $86,000, with associated expenses of $30,500. The additional sales revenue and expenses from the advertising program are projected to increase by 10 percent each year. Allegiences tax rate is 40 percent. (Hint: The $183,705 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 programs net present value, assuming an after-tax hurdle rate of 10 percent. (Round your intermediate and final answers to the nearest whole dollar.)