A Brewer Is Launching a New Product-Brewed Ginger Beer with a Low

Multiple Choice

A brewer is launching a new product-brewed ginger beer 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 beer. The gross profit margin for the new ginger beer 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 30%. What are incremental earnings arising from the promotional campaign this year?

A) $5.28 million
B) $3.29 million
C) $4.68 million
D) $2.10 million