Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $4.2 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 36%, and its gross profit margin averages 23% for all other products. The company's marginal corporate tax rate is 28% both this year and next year. What are the incremental earnings associated with the advertising campaign? We need four items to calculate incremental earnings: (1) incremental revenues, (2) incremental costs, (3) depreciation, and (4) the marginal tax rate. Complete the table below: (Round to the nearest dollar.) Incremental Earnings Forecast Sales of Mini Mochi Munch Year 1 Year 2 7,800,000 $ 5,800,000 Other Sales 2,200,000 2,200,000 Cost of Goods Sold (6,686,000) (5,406,000) ot Gross Profit $ 3,314,000 $ 2,594,000 Selling, General, and Admin. Expenses (4,200,000) 10 1 Depreciation 0 0 ot EBIT S (886,000) $ 2,594,000 Income tax at 28% 248,080 (726,320) ri Unlevered Net Income $ (637,920) $ 1,867,680 pt
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $4.2 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 36%, and its gross profit margin averages 23% for all other products. The company's marginal corporate tax rate is 28% both this year and next year. What are the incremental earnings associated with the advertising campaign? We need four items to calculate incremental earnings: (1) incremental revenues, (2) incremental costs, (3) depreciation, and (4) the marginal tax rate. Complete the table below: (Round to the nearest dollar.) Incremental Earnings Forecast Sales of Mini Mochi Munch Year 1 Year 2 7,800,000 $ 5,800,000 Other Sales 2,200,000 2,200,000 Cost of Goods Sold (6,686,000) (5,406,000) ot Gross Profit $ 3,314,000 $ 2,594,000 Selling, General, and Admin. Expenses (4,200,000) 10 1 Depreciation 0 0 ot EBIT S (886,000) $ 2,594,000 Income tax at 28% 248,080 (726,320) ri Unlevered Net Income $ (637,920) $ 1,867,680 pt
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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