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F. Naz
F. Naz, B.Com
Category: Multiple Problems
Satisfied Customers: 5326
Experience:  have completed B.Com and CA Finalist
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(Determing relevant cash flows) Fruity stones is considering

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(Determing relevant cash flows) Fruity stones is considering introducing a variation of its current breakfast cereal, Jolt 'n Stones. This new cereal will be similar to the old with the exception that it will contain more sugar in the form of small pebbles. The new cereal will be called Stones 'n Stuff. it is estimated that the sales for the new cereal will be $100 million; however, 40% of those sales will be from former customers Fruity Stones customers who have switched to Stones 'n Stuff. These former customers will be lost regardless of whether the new product is offered since this is the amount of sales the firm expects to lose to a competitor product that is going to be introduced at about the same time. What is the relevant sales level to consider when deciding whether or not to introduce Stones 'n Stuff?
$100 million is the relevant sales level as the former customer will be lost in anyway, therefore to keep intact the company must introduce new product, therefore the whole sales amount will have impact on decision whether to introduce new product or not, thus $100 million is the relevant sales level in the scenario.
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Customer: replied 4 years ago.

The multiple questions have not been answer. (The Medrano's Wholesale Fruit Company). My deadline is midnight, please help!!

I have provided you answers for other questions, have you gone through them, multiple questions are other than those, thanks.
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Customer: replied 4 years ago.


The last answer you sent me suppose to be the mediafire website, but I have been unsuccessful retrieving the answer. The question was the one about the replacement project cash flow "medrano's wholesale fruit company. Is there any way you can just send the answer to my e-mail address:[email protected]




Copy the link and put in internet browser and then click, it will work, however I am pasting the answer as follows:

Saving in fuel5000050000
Saving in Maintenance cost2300023000
less depreciation new trucks7200072000
Savings before taxes10001000
less taxes300300
Savings after taxes700700
add depreciation7200072000
Differential operating cashflow7270072700
add market value of new truck040000
After tax cash flow72700112700
Cost of new truck400000
less after tax cashflow old trucks14000
Initial outlay386000
d PVIF at 15%PV
AS the NPV is negative and IRR is far below the discount rate of 15%, therefore the fleet should not be replaced.