This Question Is to Be Considered Independently of All Other

question 120

Multiple Choice

This question is to be considered independently of all other questions relating to Marchman Corporation. Refer to the original data when answering this question.
-The marketing manager believes that a $6,000 increase in the monthly advertising budget would result in a 130 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

• A)decrease of $240
• B)decrease of $6,000
• C)increase of $240
• D)increase of $6,240

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Definitions:

Cash Payback Method

The cash payback method is a capital budgeting method that estimates the time required for a project to generate cash flows sufficient to recoup the initial investment.

Average Rate Of Return Method

An investment appraisal technique that calculates the expected return of an investment by averaging its annual profits and dividing by its initial cost.

Net Present Value Method

A method used in capital budgeting and investment planning that calculates the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Net Present Value Method

A financial analysis tool used to determine the attractiveness of an investment by calculating the present value of its future cash flows.