70 Cold Drinks Ltd. bottles and distributes 'Cola' brand cold drinks. It operates its distribution division as a cost centre. Budgeted cost for the year ending 31 March, 2013 is as follows: Cash Operating Costs...... Depreciation on Fleet of Vehicles (8 x 52,500). Apportioned Corporate Costs (3) 21,00,000 4,20,000 3,00,000 28,20,000 Distribution division has started operation on 1st April, 2011. Each vehicle of the fleet was acquired at a cost of 2,40,000 and had an estimated economic life of four years. Salvage value of each vehicle at the end of four years (March 31, 2015) was estimated at 30,000. Native Distributors Ltd. which has countrywide network for the distribution of food and beverages has offered Cold Drinks Ltd. a three year distribution contract for 19.50,000 each year. The contract will start on 1 April, 2012 If Cold Drinks Ltd. accepts the offer, it will close down its own distribution division, and will sell the delivery vehicles. Current (April 1, 2012) disposal price of each vehicle is estimated at 75,000. Cold Drinks Ltd. will avoid cash operating cost of 21,00,000 Security analysts have recommended the purchase of share of Cold Drinks Ltd., security analysts are forecasting a net profit of 6,60,000 for 2012-13 as against an estimated Profit of 6,30,000 for 2011-12, the forecast assumes that the company will continue operation of its distribution division. Required (0) Tabulate a comparison of all relevant cost for next three years (2012-13 to 2014-15) for the two alternatives - use of own distribution division or use of Native distributors Ltd. Recommend whether Cold Drinks Ltd. should accept the offer of Native distributors Lid (ii) Why might Cold Drinks Ltd. be reluctant to accept the offer of Native distributors Ltd? (ignore Income-tax and time value of money. Wherever appropriate, suitable assumption to be made by you)