Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $4.8 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 $7.6 million this year and $5.6 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 $2.4 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 34%, and its gross profit margin averages 22% for all other products. The company's marginal corporate tax rate is 35% both this year and next year. What are the incremental earnings associated with the advertising campaign? Complete the following table:
Incremental Earnings Forecast Year 1
Sales of Mini Moch Munch $7,600,000
Other Sales $2,400,000
Cost of goods sold $5,016,000
Gross Profit $2,584,000
Selling, General, and Admin expenses $4,800,000
Depreciation $
EBIT $
Income tax at 35% $
Unlevered Net Income $