Question 19Which Plan is Riskier and Why? Choose one plan and one reason.O It is more highly leveredThere is less equity put into this projectBIt is less leveredMarketplace interest rates may move materially in a yearO It has a lower Z score Your startup LLC (which pays no income tax) has $500K available for a one-year marketing campaign of your SuperSoftware productin Market X. You note that Market Y would also be a great place for a marketing campaign. The cost of a campaign in Y would be$300K. You present the firm's CFO with two options. A) Run a campaign in just Market X. B) Run a campaign in both X and Y,funding the Y campaign with a long term loan from Bank of China with a 10% annual interest rate. Here is more relevant financialinformation:Notes for Plan BLoan amount for B)Debt int. rate is:300 K10.0%Projected Annual Income Statementsfor marketing campaigns (SK)Estimated Sales Generated from Campaign(s)Direct Campaign CostRequired interest Cost @10%Campaign Net IncomePlanPlanA1200.00-800.00750.00500.000.00250.00Campaign Profit MarginUse this info to answer the following questions.Question 19Vhich Plan is Riskier and Why? Choose one plan and one reason.

Both the plans are attractive but in order to see which plan is better one should know that which of…

in Market X. You note that Market Y would also be a great place for a marketing campaign. The cost of a campaign in Y wou $300K. You present the firm's CFO with two options. A) Run a campaign in just Market X. B) Run a campaign in both X and funding the Y campaign with a long term loan from Bank of China with a 10% annual interest rate. Here is more relevant fir information: Notes for Plan B Loan amount for B) Debt int. rate is: 300 K 10.0% Projected Annual Income Statements for marketing campaigns (SK) Estimated Sales Generated from Campaign(s) Direct Campaign Cost Required Interest Cost @10% Campaign Net Income Plan Plan A 1200.00 -800.00 B 750.00 500.00 0.00 250.00 Campaign Profit Margin Use this info to answer the following questions. Question 19 Vhich Plan is Riskier and Why? Choose one plan and one reason.

in Market X. You note that Market Y would also be a great place for a marketing campaign. The cost of a campaign in Y wou $300K. You present the firm's CFO with two options. A) Run a campaign in just Market X. B) Run a campaign in both X and funding the Y campaign with a long term loan from Bank of China with a 10% annual interest rate. Here is more relevant fir information: Notes for Plan B Loan amount for B) Debt int. rate is: 300 K 10.0% Projected Annual Income Statements for marketing campaigns (SK) Estimated Sales Generated from Campaign(s) Direct Campaign Cost Required Interest Cost @10% Campaign Net Income Plan Plan A 1200.00 -800.00 B 750.00 500.00 0.00 250.00 Campaign Profit Margin Use this info to answer the following questions. Question 19 Vhich Plan is Riskier and Why? Choose one plan and one reason.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section: Chapter Questions

Problem 1kM

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