Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $5.0 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 $9.0 million this year and $7.0 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 $2.0 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 35%, and its gross profit margin averages 25% for all other products. The company's marginal corporate tax rate is 21% 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 Sales of Mini Mochi Munch Other Sales Cost of Goods Sold Gross Profit Selling, General, and Admin. Expenses Depreciation EBIT Income tax at 21% Unlevered Net Income $ $ $ $ Year 1 9,000,000 $ 11,000,000 7,350,000 3,650,000 $ 5,000,000 0 1,350,000 $ 283,500 1,066,500 Year 2 7,000,000 9,000,000 6,050,000 2,950,000 0 2,950,000 619,500 $ 2,330,500
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $5.0 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 $9.0 million this year and $7.0 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 $2.0 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 35%, and its gross profit margin averages 25% for all other products. The company's marginal corporate tax rate is 21% 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 Sales of Mini Mochi Munch Other Sales Cost of Goods Sold Gross Profit Selling, General, and Admin. Expenses Depreciation EBIT Income tax at 21% Unlevered Net Income $ $ $ $ Year 1 9,000,000 $ 11,000,000 7,350,000 3,650,000 $ 5,000,000 0 1,350,000 $ 283,500 1,066,500 Year 2 7,000,000 9,000,000 6,050,000 2,950,000 0 2,950,000 619,500 $ 2,330,500
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Hi can someone help me solve for other sales? I keep getting it wrong.
Transcribed Image Text:Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $5.0 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 $9.0 million this year and $7.0 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 $2.0 million each year.
Kokomochi's gross profit margin for the Mini Mochi Munch is 35%, and its gross profit margin averages 25% for all other products. The company's marginal corporate tax
rate is 21% 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
Sales of Mini Mochi Munch
Other Sales
Cost of Goods Sold
Gross Profit
Selling, General, and Admin. Expenses
Depreciation
EBIT
Income tax at 21%
Unlevered Net Income
$
$
$
EA
Year 2
7,000,000
9,000,000 $
11,000,000
9,000,000
7,350,000
6,050,000
3,650,000 $ 2,950,000
5,000,000
Year 1
0
0
1,350,000 $ 2,950,000
283,500
619,500
1,066,500
2,330,500
$
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