XYZ Corporation
Suggested Net Profit Projections 1996-99
The company can boost sales and therefore prevent the expected decline in net
profit by undertaking a new advertising campaign during 1996. The advertising
campaign could be funded by a one-off injection of $100 000 in advertising in
1996, and the advertising amounts kept as budgeted for the next 3 years. The
result is shown in the table bellow.
As it is shown on the chart, the injection in
advertising will change the structure of the
expenses in 1996. The injection will increase
Sales by 15% over the projected amounts for
each of the next 3 years. Cost of Goods Sold
will also increase by 10% each year above the
projected amounts and there will be an increase
in interest of $10 000 per year from 1997.
The injection of $100,000 in advertising in 1996 is estimated to increase the total net profit for the period by $20,500 to $80,500.
Initial Net Profit Projections 1996-99