The firms managers plans to evaluate the potential

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Unformatted text preview: posed purchase of the new machine. The firm is subject to a 40% tax rate on both ordinary and capital gains income. 388 PART 3 LG4 LG5 Long-Term Investment Decisions LG6 8–22 Relevant cash flows for a marketing campaign Marcus Tube, a manufacturer of high-quality aluminum tubing, has maintained stable sales and profits over the past 10 years. Although the market for aluminum tubing has been expanding by 3% per year, Marcus has been unsuccessful in sharing this growth. To increase its sales, the firm is considering an aggressive marketing campaign that centers on regularly running ads in all relevant trade journals and exhibiting products at all major regional and national trade shows. The campaign is expected to require an annual tax-deductible expenditure of $150,000 over the next 5 years. Sales revenue, as shown in the income statement for 2003 (below), totaled $20,000,000. If the proposed marketing campaign is not initiated, sales are expected to remain at this level in each of the next 5 years, 2004–2008. With the mar...
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This document was uploaded on 01/19/2014.

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