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Assume that after further research and examination, marketing contributed only 50% to new sales in UK, Bulgaria, and Poland, but 100% to new sales in

Assume that after further research and examination, marketing contributed only 50% to new sales in UK, Bulgaria, and Poland, but 100% to new sales in Romania. Your supervisor has asked you to formulate a decision as to whether the company should continue the marketing campaigns.

Please explain how IRR, NPV, and payback were calculated.

F1 Impact factor 100% Estimate of contribution of marketing to new sales
Year 0 Year 1 Year 2 Year 3
Sponsorship Related Sales $ 500,000 $ 750,000 $ 1,000,000
Romania Campaign $ 2,500,000 $ 2,500,000 $ 2,500,000
UK Campaign $ 2,500,000 $ 2,500,000
Bulgaria Campaign $ 2,500,000 $ 2,500,000
Poland Campaign $ 2,500,000 $ 2,500,000
Total revenues $ 2,500,000 $ 10,000,000 $ 10,000,000
COGS $ (1,750,000) $ (7,000,000) $ (7,000,000)
Net Profit $ 750,000 $ 3,000,000 $ 3,000,000
Sponsorship cost $ (250,000) $ (850,000) $ (850,000) $ (850,000)
Marketing activation cost $ (250,000) $ (600,000) $ (750,000)
Total Costs $ (250,000) $ (1,100,000) $ (1,450,000) $ (1,600,000)
EBIT $ (250,000) $ (350,000) $ 1,550,000 $ 1,400,000
Tax $ 96,250 $ 134,750 $ (596,750) $ (539,000)
Net Profit (or loss) After Tax $ (153,750) $ (215,250) $ 953,250 $ 861,000
IRR 132%
NPV $916,813
Payback (years) 1.4
$ (369,000) $ 584,250
0.387096774

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