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Capital Budgeting

Here is the situation. I am an account manager, I have been given an account. The account is on track to generate 1M dollars a year. I want to take 4% of the quarterly revenue and dedicate it to a marketing program that will help the account generate 1.5M at the end of the fiscal year, 1.75M at year 2 and 2M dollars at year 3. The problem is I do not know the cost, other then the 4% per quarter that I will be dedicating to marketing. In this instance can I still do a NPV analysis. The reseller (account) is selling laptops. Can I do NPV with just the cost I will be dedicating to the marketing program?

Solution Preview

Yes, you can still do an NPV analysis. You can do an incremental NPV analysis and determine how much more will the marketing cost enable you to increase the ...

Solution Summary

The solution goes into a great amount of detail regarding the question being asked. Step by step explanation is provided for each part of the question which makes it very easy to follow along for anyone with just a basic understanding of the concepts. Overall, an excellent response to the question being asked.

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