You are the marketing director of Proctor and Proctor Pharmaceuticals (P&P). You are trying to decide...

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You are the marketing director of Proctor and Proctor Pharmaceuticals (P&P). You are trying to decide whether to run an advertising campaign for a new shampoo product Bubbles. The cost of the ad campaign is $1m. Your marketing research team forecasts that if Bumble Bubbles is launched with the campaign, it will generate net cash profits $500,000 per year. However net cash profits on your existing brands will decrease by 10% because customers want to try out your new product. The shampoo business is a $2m net-cash- profit business in your firm. You have a 5- year horizon and your cost of capital (i.e. your discount rate) is 15%. What is the Net Present Value of the Project? You are the marketing director of Proctor and Proctor Pharmaceuticals (P&P). You are trying to decide whether to run an advertising campaign for a new shampoo product Bubbles. The cost of the ad campaign is $1m. Your marketing research team forecasts that if Bumble Bubbles is launched with the campaign, it will generate net cash profits $500,000 per year. However net cash profits on your existing brands will decrease by 10% because customers want to try out your new product. The shampoo business is a $2m net-cash- profit business in your firm. You have a 5- year horizon and your cost of capital (i.e. your discount rate) is 15%. What is the Net Present Value of the Project?

Answer rating: 100% (QA)

SOLUTION STEP 1 NB Net cash flow ... View the full answer