A firm is contemplating an advertising campaign that promises to yield $120 one year fom now for $100 spent now. Explain why the firm should or should not undertake the advertising campaign.© BrainMass Inc. brainmass.com October 10, 2019, 2:37 am ad1c9bdddf
Let us see the incremental cash flows associated
Current cash outflow=Co=$100
Net cash inflow at the end of year 1=C1=$120
Let us see at what level of r, PV of cash net inflows is equal ...
Solution discusses why the given firm should or should not undertake the advertising campaign.