Question
Nvidia is launching an advertising campaign for its latest gaming software, the Rocky Rhino. Nvidia plans to spend $5 million on YouTube, social media, and
Nvidia is launching an advertising campaign for its latest gaming software, the Rocky Rhino. Nvidia plans to spend $5 million on YouTube, social media, and print this year for the campaign. The ads are expected to boost sales of the Rocky Rhino by $9 million this year and $7 million next year. In addition, the company expects that new consumers who try the Rocky Rhino will be more likely to try other products produced by Nvidia. As a result, sales of other products are expected to rise by $2 million each year.
Nvidias gross profit for Rocky Rhino is 35%, and its gross profit averages 25% for all other products. The companys marginal corporate tax rate is 35% both this year and next year. What are the incremental earnings associated with the advertising campaign?
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