1. Fruit Stones is considering introducing 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 percent of those sales will be from former Fruity Stones customers who have switched to Stones n Stuff. These former customers will be lost regardless of whether the new product is offered because this is the amount of sales the firm expects to lose to a competitor product that is going to be deciding whether or not to introduce Stones n Stuff?

2. Tetious Dimensions is introducing a new product that is expected to increase its net operating income by $775,000. Tetious Dimensions has a 34 percent marginal tax rate. This project will also produce $200,000 of depreciation per year. In addition, this project will cause the following changes:

	Without the Project	With the Project
Accounts receivable	$55,000	$89,000
Inventory	100,000	180,000
Accounts payable	70,000	120,000

3. Racins Scooters is introducing a new product and has an expected change in net operating income of $475,000. Racin Scooters has a 34 percent marginal tax rate. This project will also produce $100,000 of depreciation per year. In addition, this project will cause the following changes:

	Without the Project	With the Project
Accounts receivable	$45,000	$63,000
Inventory	65,000	80,000
Accounts payable	70,000	94,000

REQUIREMENT: Compute for the projected operating cash flows (see the sample format below).

0 1 2 3 4 5 Purchase -200,000.00 360,000.00 360,000.00 360,000.00 360,000.00 Sales Increase in AR Increase in INV Increase in AP COGS Cash OPEX EBITDA -60,000.00 -36,000.00 18,000.00 360,000.00 60,000.00 36,000.00 -18,000.00 -216,000.00 5,000.00 139,000.00 -41,700.00 -216,000.00 5,000.00 139,000.00 -41,700.00 -216,000.00 5,000.00 139,000.00 -41,700.00 -216,000.00 5,000.00 139,000.00 -41,700.00 -216,000.00 -5,000.00 139,000.00 -41,700.00 Taxes Tax Shield from DA OCF 12,000.00 109,300.00 12,000.00 109,300.00 12,000.00 109,300.00 12,000.00 109,300.00 12,000.00 187,300.00 -278,000.00