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Homework answers / question archive / Kokomochi is considering the launch of an advertising campaign for its latest dessert? product, the Mini Mochi Munch

Kokomochi is considering the launch of an advertising campaign for its latest dessert? product, the Mini Mochi Munch

Business

Kokomochi is considering the launch of an advertising campaign for its latest dessert? product, the Mini Mochi Munch. 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 $7.8 million this year and $5.8 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 $2.2 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 38%?, 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?

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 $  
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 35% $  
Unlevered Net Income $  

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