Fruity Fruits Ltd. currently sells $25 million annually of apple juice in 1 litre containers and $10 million of individually packaged dried fruit snacks. The company wants to introduce a 230 mL single-serving cranberry-apple juice product next year. A $200,000 feasibility study just completed estimated yearly sales of $12 million for the new juice. The study also forecast that sales of the company's existing apple juice would fall by $2 million as some existing customers would switch to the new beverage; however, sales of the snack product would increase by 10% due its complementary nature to the new product. The company has unused land it can use, which was purchased two years ago for $500,000. That land could currently be sold for $700,000. Building and equipment costs for the new project are $1,000,000. What is the initial investment and first-year cash inflow for this project?

Fruity Fruits Ltd. currently sells $25 million annually of apple juice in 1 litre containers and $10 million of individually packaged dried fruit snacks. The company wants to introduce a 230 mL single-serving cranberry-apple juice product next year. A $200,000 feasibility study just completed estimated yearly sales of $12 million for the new juice. The study also forecast that sales of the company's existing apple juice would fall by $2 million as some existing customers would switch to the new beverage; however, sales of the snack product would increase by 10% due its complementary nature to the new product. The company has unused land it can use, which was purchased two years ago for $500,000. That land could currently be sold for $700,000. Building and equipment costs for the new project are $1,000,000. What is the initial investment and first-year cash inflow for this project?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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