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do both for an automatic thumb up Roromochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch.
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Roromochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $6.3 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 $9.2 million this year and $7.2 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 $2.3 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 36%, and its gross profit margin averages 23% 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? RE Complete the table below: (Round to the nearest dollar.) Yoar 1 $ $ Incremental Earnings Forecast Sales of Mini Mochi Munch Other Sales Cost of Goods Sold Gross Profit Selling, General, and Admin. Expenses Depreciation EBIT $ S $ 0 $ Income tax at 35% $ Unlevered Net Income $ One year ago, your company purchased a machine used in manufacturing for $95,000. You have learned that a new machine is available that offers many advantages and you can purchase it for $170,000 today. It will be depreciated on a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $45,000 per year for the next 10 years. The current machine is expected to produce a gross margin of $21,000 per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, and has no salvage value, so depreciation expense for the current machine is $8,636 per year. The market value today of the current machine is $65,000. Your company's tax rate is 35%, and the opportunity cost of capital for this type of equipment is 10%. Should your company replace its year-old machine? The NPV of replacing the year-old machine is $(Round to the nearest dollar) Step by Step Solution
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