Incomes associated with the advertising campaign


Problem:

Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $3.03 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 $10.78 million this year and $8.78 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 $3.14 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 30% both this year and next year.

Required:

Question 1: What are the unlevered net incomes associated with the advertising campaign?

Question 2: How do you find the COGS in this problem?

Note: Please show guided help with steps and answer.

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Finance Basics: Incomes associated with the advertising campaign
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