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

$4.56

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

$8.96

million this year and

$6.96

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

$2.11

million each year.Kokomochi's gross profit margin for the Mini Mochi Munch is

34%,

and its gross profit margin averages

24%

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?

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.

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Part 1

Calculate the incremental earnings for year 1 below:(Round to three decimal places.)

		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 40%	$
Incremental Earnings	$