Question
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $ 5.63 million
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend
$ 5.63 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 $ 11.19
million this year and $ 9.19 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 $3.99 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 40% both this year and next year. What are the incremental earnings associated with the advertising campaign?
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