Question

Kokomochi is considering the launch of an advertising campaign for its latest dessert​ product, the Mini...

Kokomochi is considering the launch of an advertising campaign for its latest dessert​ product, the Mini Mochi Munch. Kokomochi plans to spend $5.7 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 $9.1 million this year and $7.1 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 $2.3 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 30% both this year and next year. What are the incremental earnings associated with the advertising​ campaign?

Complete the table for year 1​ 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 30%

Unlevered net profit

$

Complete the table for year 2​ below:  ​(Round to the nearest​ dollar.)

Incremental earnings forecast

Year 2

Sales of Mini Mochi Munch

$

Other sales

Cost of goods sold

Gross profit

$

Selling, general and admin. expenses

Depreciation

0

EBIT

$

Income tax at 30%

Unlevered net profit

$

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