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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 $ 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 $ million this year and $ million next year. In addition, the company expects that new consumers who try the Mini Mochi Munch will be more likely to try Kokomochis other products. As a result, sales of other products are expected to rise by $ million each year.
Kokomochis gross profit margin for the Mini Mochi Munch is and its gross profit margin averages for all other products. The company's marginal corporate tax rate is both this year and next year. What are the incremental earnings associated with the advertising campaign?
Incremental Earnings Forecast
Year
Year
Sales of Mini Mochi Munch
$
$
Other Sales
Cost of Goods Sold
Gross Profit
$
$
Selling, General, and Admin. Expenses
Depreciation
EBIT
Income tax at
Unlevered Net Income
$
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