Question
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $ 6.4$6.4 million
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend
$ 6.4$6.4
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
$ 8.8$8.8
million this year and
$ 6.8$6.8
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
$ 1.6$1.6
million each year.Kokomochi's gross profit margin for the Mini Mochi Munch is
33 %33%,
and its gross profit margin averages
22 %22%
for all other products. The company's marginal corporate tax rate is
35 %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 | |
Sales of Mini Mochi Munch | $ | |
Other Sales | $ | 1600000 |
Cost of Goods Sold | $ |
|
Gross Profit | $ |
|
Selling, General, and Admin. Expenses | $ | 6400000 |
Depreciation |
| 0 |
EBIT | $ |
|
Income tax at 35% | $ |
|
Unlevered Net Income | $ |
|
Year 2 :
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