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Lighting2551 Lighting2551
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4 years ago
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
Textbook 
Fundamentals of Corporate Finance

Fundamentals of Corporate Finance


Edition: 2nd
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vande746vande746
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Lighting2551 Author
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4 years ago
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