Igor's Ice Cream Income Statement Igor's Ice Cream business is struggling. Igor is hoping marketing new flavors will help him. For an additional one-time $2000 in marketing costs, Igor is hoping for a boost in sales. The new marketing should boost his sales by 7% next year, 15% in year 2, 7% in year 3, 3% in year 4, and be obsolete after 4 years. Variable costs will continue to be 35% of sales and taxes will continue to be 15% of EBIT. The additional marketing costs are expensed on the income statement, thus there is no change in annual depreciation and no shutdown tax effects. 2017 Sales $ 92,000 Cost of Goods Sold 32,200 Igor doesn't expect any salvage value from his marketing materials. Gross Profit 59,800 SGA Depreciation 33,600 5,120 Operating Income (EBIT) 21,080 Interest Expense 600 Earnings Before Taxes 20,480 Income Tax 3,072 Net Income $ 17,408 Dividends Paid $ 22,000 8) Does the source of financing change your recommendation? Change in Retained Earnings $ (4,592) If Igor pursues this plan, his current assets are projected to increase from $4750 to $10370 and his current liabilities are projected to decrease from $1580 to $748. 1) Create a 4-year schedule of cash flows for Igor. Calculate the expected 2) NPV, 3) IRR, and 4) MIRR of this marketing plan if Igor expects to pay for it using existing cash-on-hand (with a cost of capital of 7.7%) Calculate the expected 5) NPV, 6) IRR, and 7) MIRR of this marketing plan if Igor instead uses his line of credit at 3.5%