Question

Kokomochi is considering the launch of an advertising campaign for its latest dessert​ product, the Mini Mochi Munch. Kokomochi plans to spend

$ 6.4

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

39 %

and its gross profit margin averages

21 %

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	$
Other Sales	$
Cost of Goods Sold	$
Gross Profit	$
Selling, General, and Admin. Expenses	$
Depreciation		0
EBIT	$
Income tax at 35%	$
Unlevered Net Income	$

Year 2
$
$
$
$
$
	0
$
$
$

Answer 1

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