16.

COMPUTATION

Formula PV = FV / (1 + i) n

PV High = 20 000 000 / (1+ 0.9) + 80 000 000 / (1+ 0.9) 2 + 300 000 000 / (1+ 0.9) 3

PV High = 20 000 000 / (1.9) + 80 000 000 / (1.9) 2 + 300 000 000 / (1.9) 3

PV High = 18, 348,623.8532 + 67, 334,399.4613 + 231, 655, 044.018

PV High = $ 317, 338, 067.22

PV Moderate = 40 000 000 / (1+ 0.9) + 80 000 000 / (1+ 0.9) 2 + 135 000 000 / (1+ 0.9)3

PV Moderate = 40 000 000 / (1.9) + 80 000 000 / (1.9) 2 + 135 000 000 / (1.9) 3

PV Moderate = 36 697 247.7064 + 67 334 399.4613 + 104 244 769.808

PV Moderate = $ 208, 276, 416.975

PV Low = 75, 000, 000 / (1+ 0.9) + 110, 000, 000 / (1+ 0.9) 2 + 118, 000, 000 / (1+ 0.9)3

PV Low = 75, 000, 000 / (1.9) + 110, 000, 000 / (1.9) 2 + 118, 000, 000 / (1.9) 3

PV Low = 68, 807, 339.4495 + 92, 584, 799.2593 + 91, 117, 65.6472

PV Low = $ 252, 509, 789.355

ANSWER:

Based from the present value of the profits from each advertising strategy, we can all agree that
higher intensity advertising has gain a lot of profits in three years. However, low intensity
advertising also gain a lot of profits especially on its first and second year exceeding the high
intensity advertising but on its third year the high intensity giving a $ 64, 288, 277.865 difference
with the low advertising. At some, point we can all agree that high intensity advertising is the
best option among all which we declined the recommendations of the team leader but using
marginal analysis, we can use all of these three intensity of adverting or the high and low
advertising only to maximize the value of the firm because they also had the great effects on our
firm profits because they increase profits.
17.

18. COMPUTATION

Traditional IRA

Formula: PV = FV / (1 + i) n

PV = 2500 / (1+ 0.19) + 2500 / (1+0.19) 2 + 2500 / (1+0.19) 3 + 2500 / (1+0.19) 4

PV = 2500 / (1.19) + 2500 / (1.19) + 2500 / (1.19) + 2500 / (1.19)

PV = 2500 / (1.19) + 2500 / (1.14161) + 2500 / (1.685159) + 2500 / (2.00533921)

PV = 2 100.84033613 + 17 645.41204717 + 1 483.53953543 + 1246.67187851

PV = $ 6 596.46379724

Formula: FV = PV (1 + r) n

FV = 6 596.46379724 (1.7)

FV = 11, 213.9884553

Roth IRA

PV = 2500 / (1) + 2500 / (1) + 2500 / (1) + 2500 / (1)

PV = 2500 + 2500 + 2500 + 2500

PV = $ 10, 000

FV = 10, 000 (1 + 0.7)

FV = 10, 000 (1.7)

FV = 17, 000

Less: 19% tax rate

Total: 3, 230

ANSWER:

I think my client would prefer the Traditional IRA because from based from the computations,
she will benefit for at least 11, 213.9884553 after 4 years compare to the Roth IRA she will only
benefit less 3, 230 from the $ 2,500 investment, although she can make her money grows in tax
free but soon after she will make her withdrawal her it will deduct because of her tax rate. Hence,
choosing the traditional roth would be a great option for her.
19. I think the strategy of Les can able to achieve the sustainable economic profits, using this
website consumer can compare and contracts between the prices and quality of the product but
they mostly the prefer the affordable one than the pricey one. Aside from it, they can also
increase their demand if ever the consumers prefer their products and by doing this it is
achieving the sustainable economics profits. As for me, I also would like to launch advertising
campaign, which would be focus on the firm’s value maximization and we all know that
advertising can help us with this because through it consumers can be persuade to try our
products.