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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 .

Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $4.55 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 $8.22 million this year and $6.22 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 $2.54 million each year.
Kokomochi's gross profit margin for the Mini Mochi Munch is 36%, and its gross profit margin averages 25% for all other products. The company's marginal corporate tax rate is 38% 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.
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 38%
Incremental Earnings
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