Bangers, In. is a start up manufacturer of Australian style frozen veggies pies located in San Antonio. The company 5 yrs old and recently installed the manufacturing capacity to quadruple its unit sales. To jump start the demand for its products the company founder have hired a local advertising firm to create a series of ads fr its new line of meat pies. the ads will cost the firm $ 300000 to run for one year. Banger management hopes advertising will produce annual sales of $ 2.2 million for its meat pies. Moreover the firm management expect that sales of its veggie pies will increase $ 200,000 next year at the result of the company name recognition derived from the meat campaign? If Banger operating profits per dollar of new sales revenue are 45% and the firm faces a 37 percent tax bracket, what is the incremental operating profit the firm expect to earn from the ad campaign? Does the decision to place the ad look good from the perspective of the anticipated profits?
The increment operating profit the firm can expect to earn from the as campaign for year 1 is $ ..... ( round to the nearest dollar )
The increment operating profit the firm can expect to earn from the as campaign for year 2 is $ ..... ( round to the nearest dollar )
The decision to place the ad appears to be an ( unacceptable or acceptable ) project since the year 1 and year 2 cash flow ( significantly ( less or greater ) than the $ 300,00 intial outlay for taking the project.