What is annual equivalent worth of this marketing campaign

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1. A company is considering entering into a new marketing campaign. If it engages in this marketing campaign, it must pay $9,000 immediately and $7,000 each at the end of year 1 and year 2. The company believes its annual revenues due to the marketing campaign will be $11,000 at the end of year 1, $9,000 at the end of year 2, and $6,000 at the end of year 3. What is the annual equivalent worth of this marketing campaign over the next three years? The interest rate is 6.8% compounded annually."

2. "Motors R Us requires a specific painting process for one its automobiles that will be manufactured for exactly eight years. Three options are available. Neither option 2 nor option 3 can be repeated after its process life. However option 1 will always be available at the same cost during the period of eight years. Here are the options: -Option 1 is to subcontract out the process at a cost of $116,000 per year. -Option 2 costs $151,000 immediately and has annual operating and labor costs of $85,000 and a useful service life of eight years with a salvage value of $41,000. -Option 3 costs $118,000 immediately and has annual operating and labor costs of $75,000 and a useful service life of five years with a salvage value of $23,000. For years six through eight, the firm will follow option 1. Enter the ""net present cost"" for the option that you would recommend if i = 14.8%. Enter your answer as positive number."

Reference no: EM131853619

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