Advertising campaign for its latest dessert product

Assignment Help Financial Management

Reference no: EM131449141

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.

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.)

Reference no: EM131449141

Questions Cloud

Assume no depreciation is allowed for tax purposes : Assume no depreciation is allowed for tax purposes, and you have to pay 30% tax on your net rental income.

Explain brownian motions : (Transformations preserving the MBM). Show, by verifying properties (1)-(3), that the following processes are Brownian motions.

Find the bid quote for euros in terms of yen : What is the ask quote for yen in terms of euros? Find the bid quote for euros in terms of yen.

Financial advisor should bring in for a training program : how much a new financial advisor should bring in for a training program with edward jones.

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

Calculating the contribution margin : Calculating the Contribution Margin The Mental Health program for the Community Center has just completed its fiscal year end.

What is annualized holding period return : You purchased 250 shares of General Motors stock at a price of $87.36 two years ago. What is your annualized holding period return (annual percentage rate)?

Make annual cash flows forever : You own a store that is expected to make annual cash flows forever. What is the value of the store if you know that the cash flow in 3 years.

Changed tax laws to allow banks to utilize the tax loss : In September? 2008, the IRS changed tax laws to allow banks to utilize the tax loss carryforwards of banks they acquire to shield their future income from taxes

User Account

All Pages