Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch.

Kokomochi plans to spend $$4\mathrm{.}16$ 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 $$9\mathrm{.}49$ million this year and $$7\mathrm{.}49$ 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 $$3\mathrm{.}48$ million each year.

Kokomochi's gross profit margin for the Mini Mochi Munch is $35\%,$ and its gross profit margin averages $24\%$ for all other

products. The company's marginal corporate tax rate is $38\%$ 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.

Year $1$

Incremental Earnings Forecast $($$ million$)$

Sales of Mini Mochi Munch

Other Sales

Cost of Goods Sold

Gross Profit

Selling, General, and Administrative

Depreciation

EBIT

Income Tax at $38\%$

Incremental Earnings