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Present worth of advertising campaign

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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.

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Solution Summary

Solution discusses why the given firm should or should not undertake the advertising campaign.

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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 ...

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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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