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Answer both years 1 and 2. Please show work! Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini
Answer both years 1 and 2. Please show work!
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $4.17 million on TV, radio, and print advertising this year for the campaign. The ads are expected to boost sales of the Mini Mochi Munch by $11.72 million this year and $9.72 million next year. In addition, the company expects that new consumers who try the Mini Mochi Munch will be more likely to try Kokomochi's other products. As a result, sales of other products are expected to rise by $2.55 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 33%, and its gross profit margin averages 25% for all other products. The company's marginal corporate tax rate is 35% both this year and next year. What are the incremental earnings associated with the advertising campaign? Note: Assume that the company has adequate positive income to take advantage of the tax benefits provided by any net losses associated with this campaign. Calculate the incremental earnings for year 1 below: (Round to three decimal places.)Step by Step Solution
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