Author Question: A brewer is launching a new product; brewed ginger ale with a low alcohol content. The brewer plans ... (Read 48 times)

NClaborn · **on:** Jul 9, 2019

A brewer is launching a new product; brewed ginger ale with a low alcohol content. The brewer plans to spend $4 million promoting this product this year, which is expected to expand its sales of this product to $10 million this year and $8 million next year. They do expect there will be loss of sales of $1 million this year and next year in their other products as customers switch to drinking the new ginger ale. The gross profit margin for the new ginger ale is 40%, the gross profit margin of all of the brewer's other products is 30%, and the brewer's marginal corporate tax rate is 35%. What are incremental earnings arising from the promotional campaign this year?
◦ $1.95 million
◦ $4.68 million
◦ $5.28 million
◦ $4.290 million

ambernicolefink · **Reply #1 on:** Jul 9, 2019

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