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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text: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?
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