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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
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 $8.6 million this year and $6.6 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 $2.4 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 35% both this year and next year. What are the incremental earnings associated with the advertising campaign? Complete the table below: (Round to the nearest dollar.) Incremental Earnings Forecast Year 1 Year 2 Sales of Mini Mochi Munch $ $ Other Sales $ $ Cost of Goods Sold $ $ Gross Profit $ $ Selling, General, and Admin. Expenses $ $ Depreciation 0 0 EBIT $ $ Income tax at 35% $ Unlevered Net Income $ $
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