Does the decision to place the ad look good

Assignment Help Financial Management

Reference no: EM131926757

(Incremental earnings from advertising synergies) Bangers, Inc. is a start-up manufacturer of Australian-style frozen veggie pies located in San Antonio, Texas.

The company is five years old and recently installed the manufacturing capacity to quadruple its unit sales. To jump start the demand for its products the company founders have hired a local advertising firm to create a series of ads for its new line of meat pies.

The ads will cost the firm $400,000 to run for one year Bangers' management hopes that the advertising will produce annual sales of $2.2 million for its meat pies.

Moreover the firm's management expects that sales of its veggie pies will increase by $200,000 next year as a result of the company name recognition derived from the meat pie ad campaign.

If Bangers' operating profits per dollar of new sales revenue are 50 percent and the firm faces a 34 percent tax bracket what is the incremental operating profit the firm can expect to earn from the ad campaign?

Does the decision to place the ad look good from the perspective of the anticipated profits?

The incremental operating profit the firm can expect to earn from the ad campaign for year 1 is $.

The incremental operating profit the firm can expect to earn from the ad campaign for year 2 is $.

The decision to place the ad appears to be an project since the year 1 and year 2 cash flow are significantly than the $400,000 initial outlay for taking the project (Select from the drop-down menus.)

Reference no: EM131926757

Questions Cloud

What is the incremental analysis if the lees choose : If production does increase dramatically after their presentation on Shark Tank, the Lees will need more space for production.

Should floral beauty use the new supplier : Floral Beauty, Inc., is a large floral arrangements store located in Eastwood Mall. Bridal Lilies, which are a specially created bunch of lilies for bridal.

Compute the series of vpin on may six flash crash : Form a time series of volume bars on E-mini S&P 500 futures, Compute the series of VPIN on May 6, 2010 (flash crash).

Changing the global environment : Describe how what humans are doing today in changing the global environment is similar to what land plants did 450-350 MYA.

Does the decision to place the ad look good : Does the decision to place the ad look good from the perspective of the anticipated profits?

How much should cameron boats expand : Cameron Boats, a supplier of boating equipment, sells 5,000 WM-4 diesel engines every year. These engines are shipped to Cameron in a shipping container.

What is the expected bid-ask spread : Apply the Corwin-Schultz estimator to a daily series of E-mini S&P 500 futures. What is the expected bid-ask spread? What is the implied volatility?

How much should the company be willing to pay : Tarbutton Lawn Distributors is a wholesale organization that supplies retail stores with lawn care and household products.

Most independent pioneer species : Cyanobacteria are often called the "most independent pioneer species" on the earth.

User Account

All Pages