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EX 16-36(Algo) Payback Period; Uneven Cash Flows (Section 3)(LO 16-1,16-6,16-8) Allegience Insurance Company's management...

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Accounting

EX 16-36(Algo) Payback Period; Uneven Cash Flows (Section 3)(LO 16-1,16-6,16-8)
Allegience Insurance Company's management is considering an advertising program that would require an initial
expenditure of $185,360 and bring in additional sales over the next five years. The projected additional sales
revenue in year 1 is $87,000, with associated expenses of $31,000. The additional sales revenue and expenses
from the advertising program are projected to increase by 10 percent each year. Allegience's tax rate is 30 percent.
(Hint: The $185,360 advertising cost is an expense.)
Use Appendix A for your reference.
Note: Use appropriate factor(s) from the tables provided.
Required:
Compute the payback period for the advertising program.
Calculate the advertising program's net present value, assuming an after-tax hurdle rate of 10 percent.
Note: Round your intermediate calculations and final answer to the nearest whole dollar.
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