Question
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $ 4.5 million
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $ 4.5 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 $ 9.8 million this year and $ 7.8 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 $ 2.5 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 32 %, and its gross profit margin averages 22 % 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?
Incremental Earnings Forecast Year 1 Sales of Mini Mochi Munch $ 9.8 Other Sales $ 2.5 Cost of Goods Sold $ (9.7) Gross Profit $ 2.56 Selling, General, and Admin. Expenses $ 0 Depreciation 0 EBIT $ 3.9 Income tax at 35% $ (1.2) Unlevered Net Income.. i got it wrong can you correct it?
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