Kokomochi is considering the launch of an advertising campaign for its latest dessert? product, the Mini Mochi Munch. Kokomochi plans to spend $ 4.34 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 $ 9.36 million this year and $ 7.36 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 $ 3.46 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 35 % and its gross profit margin averages 24 % for all other products. The? company's marginal corporate tax rate is 33 % both this year and next year.
What are the incremental earnings associated with the advertising? campaign?
?Note: Assume that the company has adequate positive income to take advantage of the tax benefits provided by any net losses associated with this campaign.
?Note: Assume that the company has adequate positive income to take advantage of the tax benefits provided by any net losses associated with this campaign.
a. Calculate the incremental earnings for year 1? below:?(Round to three decimal? places.)
b. Calculate the incremental earnings for year 2? below:?(Round to three decimal? places.)