ABC company, a seller of TVs, is considering launching an advertising campaign for its latest...
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ABC company, a seller of TVs, is considering launching an advertising campaign for its latest advanced product, toptv. ABC plans to spend $3 million on advertisements this year for the campaign. The ads are expected to boost sales of the new product by $7 million this year and $5 million next year. In addition, the company expects the new consumers who try the new product will be likelier to try ABCs other products. As a result, sales of other products are expected to rise by $2 million this year and next year. The cost of goods sold this year is 5 million and 3 million next year. The companys marginal corporate tax rate is 35% both this year and next year. What are the incremental earnings associated with the advertising campaign
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