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Kokomochi plans to spend $5.5 million on TV, radio, and print advertising this year for the campaign. The ads are expected to boost sales of
- Kokomochi plans to spend $5.5 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 $8.2 million this year and $6.2 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 $1.8 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 37%, and its gross profit margin averages 22% for all other products. The company's marginal corporate tax rate is 25% both this year and next year. A) What are the incremental earnings associated with the advertising campaign in its first year? B) What are the incremental earnings associated with the advertising campaign in its second year?
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