Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $ 4.6 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 $ 7.7 million this year and $ 5.7 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 $ 1.9 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 35 % both this year and next year. What are the incremental earnings associated with the advertising campaign?

Year 1 Year 2 A > A CA > Incremental Earnings Forecast Sales of Mini Mochi Munch Other Sales Cost of Goods Sold Gross Profit Selling. General, and Admin. Expenses Depreciation EBIT A > vepreciauun EBIT Income tax at 35% Unlevered Net Income