Project C: Marketing/Advertising Campaign

• A major new marketing/advertising campaign, which will cost $2 million per year and last 6 years.
• It is forecast that the campaign will increase sales/revenues and costs of sales by 15% per year.
• Annual sales for the previous year were $20 million.
• The marginal corporate tax rate is presumed to be 25%.
• Being a moderate risk investment, the required rate of return of the project is 10%.

Your Role

You are a finance manager at Drill Tech, Inc., who plays a major role in reviewing capital project requests.

Requirements

Jennifer reiterates that your report is critical for the company to select the project that will bring the most value to shareholders. Your calculations and report should address these items for her and other stakeholders:

• Apply computations of capital budgeting methods to determine the quality of the proposed investments.
• Use budgeting tools to compute future project cash flows and compare them to upfront costs.Remember to only evaluate the incremental changes to cash flows.
• Demonstrate knowledge of a variety of capital budgeting tools including net present value (NPV), internal rate of return (IRR), payback period, and profitability index (PI). The analysis of the capital projects will need to be correctly computed and the resulting decisions rational.
• Evaluate the capital projects using data analysis and applicable metrics that alignto the business goal of maximizing shareholder value.
• Evaluate capital projects and make appropriate decision recommendations. Accurately compare the indicated projects with correct computations of capital budgeting tools and then make rational decisions based on the findings.
• Select the best capital project, based on data analysis and evaluation, that will add the most value for the company.
• appropriate evaluation report forrequestors, using sound research and data to defend your decision.
• Justify your decision with a clear analysis showing the findings of the analysis and which project has the best chance to increase shareholder value.
• Use your calculations and data to provide a clear picture of why your recommendation is the right one. Thisgoes beyond just regurgitating the data. Think about how the data can tell the storythat will be meaningful to the readers.

Can you help me populate net present value, pay back period Initial rate of return and profibility index.?