Allegience Insurance Companys management is considering an advertising program that would require an initial expenditure of $178,740 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $83,000, with associated expenses of $29,000. The additional sales revenue and expenses from the advertising program are projected to increase by 10 percent each year. Allegiences tax rate is 30 percent. (Hint: The $178,740 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 calculations and final answer to the nearest whole dollar.)

Future Value of a Series of $1.00 Cash Flows (Ordinary Annuity) r(1+r)n1 Table III Present Value of $1.00(1+n)n1 Table IV Present Value of Series of $1.00 Cash Flows r1(1(1+rn)1)