Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $5.4 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 $9.3 million this year and $7.3 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 $1.7 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 36%, and its gross profit margin averages 24% 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?

Bliss Bar is a company that sells deluxe chocolate and candy bars based in Illinois. The company is considering launching a new product line featuring protein bars coated with their deluxe chocolate flavors. Bliss Bar has spent $75,000 developing a new protein bar line as a part of the company’s product diversification plan. It also spent another $40,000 for market research on flavors to produce.  Based on market research, Bliss Bar expects first year sales of 1,200,000 protein bars at a price of $2.45 per unit with an expected annual growth of 3% in sales volume each year of the six-year project. The variable costs per unit are $0.80, and the annual fixed costs are $30,000.   Bliss Bar estimates that the net working capital will be 8% of next year’s sales.   The launch of this new product line is expected to cannibalize the sales of an existing candy bar, Choco-O! by 10,000 units per year. Choco-O! is sold at a price of $2 per unit and has variable costs of $0.50 per unit.   To expand…

With the growing popularity of casual surf print clothing, two recent MBA graduates decided to broaden this casual surf concept to encompass a “surf lifestyle for the home.” With limited capital, they decided to focus on surf print table and floor lamps to accent people’s homes. They projected unit sales of these lamps to be 11,500 in the first year, with growth of 8 percent each year for the next five years. Production of these lamps will require $75,000 in net working capital to start. Total fixed costs are $170,000 per year, variable production costs are $21 per unit, and the units are priced at $66 each. The equipment needed to begin production will cost $650,000. The equipment will be depreciated using the straight-line method over a 5-year life and is not expected to have a salvage value. The tax rate is 25 percent and the required rate of return is 18 percent. What is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places,…

K Pisa Pizza, a seller of frozen pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be $24 million per year. While many of these sales will be to new customers, Pisa Pizza estimates that 30% will come from customers who switch to the new, healthier pizza instead of buying the original version. a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza? b. Suppose that 40% of the customers who will switch from Pisa Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this case? a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza? The…

Winnebagel Corporation currently sells 33,000 motor homes per year at $71,000 each, and 13,500 luxury motor coaches per year at $108,000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 28,000 of these campers per year at $15,500 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 2,400 units per year and reduce the sales of its motor coaches by 1,100 units per year. What is the amount to use as the annual sales figure when evaluating this project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) Annual sales

Coronado Enterprises is a boutique guitar manufacturer. The company produces both acoustic and electric guitars for rising and established professional musicians. Sharon Lee, the company’s sales manager, prepared the following sales forecast for 2022. The forecasted sales prices include a 5% increase in the acoustic guitar price and a 10% increase in the electric guitar price, to cover anticipated increases in raw materials prices.     Sales Price   1st Quarter   2nd Quarter   3rd Quarter   4th Quarter   Acoustic guitar sales   $1,250     240     270     310     340     Electric guitar sales   $2,100     400       350     320     360   On December 31, 2021, Coronado had 30 acoustic guitars in stock—fewer than the desired inventory level of 96 guitars, based on the following quarter’s sales. The company has budgeted for sales of 240 acoustic guitars in the first quarter of 2023. Prepare the 2022 production budget for acoustic guitars.   Production…

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