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X Company is considering conducting an immediate advertising campaign in order to increase sales of one of its more popular products. The marketing department did market research last year that suggested the company could sell 6,500 more units of this product; the cost of this research was $13,400.
The cost of the advertising campaign would be $59,200. The product's contribution margin is $10.00 per unit; additional annual fixed costs would be $15,000. The increased sales are expected to last for 6 years.
Assuming a discount rate of 6%, what is the net present value of this investment?
Moouu 2: TexTa SAMPLE PROBLEMS 113 Table 1: Present Value of $1.00 4% 6% UPHE 11 Period 1% 1 0.990 2 0.980 3 0.971 4 0.961 5 0.951 6 0.942 7 0.933 8 0.923 9 0.914 10 0.905 11 0.896 12 0.887 13 0.879 14 0.870 E 2% 0.980 0.961 0.942 1.924 0.906 0.888 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 3% 0.971 0.943 0.915 0.888 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0.661 0.962 0.925 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 JULI 5% 0.952 0.907 0.864 0.823 0.784 0.746 0.711 0.677 0.645 0.614 0.585 0.557 0.530 0.sos 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0.527 0.497 0.469 0.442 7% 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.415 0.388 8% 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 9% 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 10% 11% 12% 13% 14% 15% 0.9090.901 0.893 0.885 0.877 0.870 0.826 0.812 0.797 0.783 0.769 0.756 0.751 0.731 0.712 0.693 0.675 0.658 83 0.659 0.636 0.613 0.592 0.572 0.621 0.593 0.567 0.543 0.519 0.497 0.564 0.535 0.507 0.480 0.456 0.432 0.513 0.482 0.452 0.425 0.400 0.376 0.467 0.434 0.404 0.376 0.351 0.327 0.424 0.391 0.361 0.333 0.308 0.284 0.386 0.352 0.322 0.295 0.270 0.247 0.350 0.317 0.2870.261 0.237 0.215 0.319 0.286 0.257 0.231 0.208 0.187 0.290 0.258 0.229 0.204 0.182 0.163 0.263 0.232 0.205 0.181 0.160 0.141 L IIII ID 1 Table 2: Present Value of an Annuity of $1.00 Period 1 2 3 4 5 TUE 6 7 8 1% 0.990 1.970 2.941 3.902 4.853 5.795 6.728 7.652 8.566 9.471 10.368 11.255 12.134 13.004 2% 0.980 1.942 2.884 3.808 4.713 5.601 6.472 7.325 8.162 8.983 9.787 10.575 11.348 12.106 3% 0.971 1.913 2.829 3.717 4.580 5.417 6.230 7.020 7.786 8.530 9.253 9.954 10.635 11.296 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 8.111 8.760 9.385 9.986 10.563 5 0.952 1.859 2.723 3.546 4.329 5.076 5.786 6.463 7.108 7.722 8.306 8.863 9.394 9.899 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 7.887 8.384 8.853 9.295 7% 0.935 1.808 2.624 3.387 4.100 4.767 5.389 5.971 6.515 7.024 7.499 7.943 8.358 8.745 8% 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7.904 8.244 9% 0.917 1.759 2.531 3.240 3.890 4.486 5.033 5.535 5.995 6.418 6.805 7.161 7.487 7.786 10% 11% 12% 13% 14% 15% 0.909 0.901 0.893 0.885 0.877 0.870 1.736 1.713 1.690 1.668 1.647 1.626 2.487 2.444 2.402 2.361 2.322 2.283 3.170 3.102 3.037 2.974 2.914 2.855 3.791 3.696 3.605 3.517 3.433 3.352 4.355 4.231 4.111 3.998 3.889 3.784 4.8684.712 4.564 4.423 4.288 4.160 5.335 5.146 4.968 4.799 4.6394.487 5.7595.537 5.3285.132 4.9464.772 6.145 5.889 5.650 5.426 5.216 5.019 6.495 6.207 5.9385,6875,4535.234 6.814 6.492 6.1945.918 5.660 5.421 7.103 6.750 6.4246.122 5.842 5.583 7.367 6.982 6.628 6.302 6.002 5.724 H 9 10 IND 1 12 13 14
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