Question

Kokomochi is considering the launch of an advertising campaign for its latest dessert​ product, the Mini Mochi Munch. Kokomochi plans to spend $4.97 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 $8.09 million this year and $6.09 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 $2.8 million each year. ​Kokomochi's gross profit margin for the Mini Mochi Munch is 33%​,and its gross profit margin averages 24% for all other products. The​ company's marginal corporate tax rate is 45% both this year and next year. What are the incremental earnings associated with the advertising​ campaign?

Note​:

Assume that the company has adequate positive income to take advantage of the tax benefits provided by any net losses associated with this campaign.

**Round 3 decimal places**

Answer 1

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