Question
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $4.7 million on
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $4.7 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 $9.3 million this year and $7.3 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 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 35%, 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?
Complete the table below:(Round to the nearest dollar.)
Incremental Earnings Forecast | Year 1 | |
Sales of Mini Mochi Munch | $ | 9300000 |
Other Sales | $ | 1600000 |
Cost of Goods Sold | $ | |
Gross Profit | $ | |
Selling, General, and Admin. Expenses | $ | |
Depreciation | 0 | |
EBIT | $ | |
Income tax at 35% | $ | |
Unlevered Net Income | $ |
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