Calculate Cash Flows Nature's Way Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 2,500 units at $60 each. The new manufacturing equipment will cost $227,000 and is expected to have a 10-year life and $17,000 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis: Direct labor Direct materials Fixed factory overhead-depreciation Variable factory overhead $8.00 22.00 8.40 3.60 $42.00 Total Determine the net cash flows for the first year of the project, Years 2-9, and for the last year of the project. Do not round your intermediate calculations but, if required, round your final answer to the nearest dollar Cornucopia Inc. Net Cash Flows ear 1 Years 2-9 Last Year Initial investment Operating cash fiows: Annual revenues Selling expenses Cost to manufacture Net operating cash flows Total for Year 1 Total for Years 2-9 Residual value Total for last year Internal Rate of Return A project is estimated to cost $127,376 and provide annual net cash flows of $38,000 for five years. Present Value of an Annuity of $1 at Compound Interest 10% 0.909 1.736 12% 0.893 1.690 2.673 2.487 2.4022.283 2.106 3.037 3.605 4.9174.355 4.111 3.784 3.326 5.582 4.8684.564 4.160 3.605 4.968 5.328 7.360 6.145 5.6505.019 4.192 Year 696 0.943 1.833 15% 0.870 1.626 20% 0.833 1.528 3.465 4 3.170 2.855 2.589 4.212 3.791 5 3.352 2.991 6.210 5.335 4.487 3.837 4.031 9 6.802 5.759 4.772 10 Determine the internal rate of return for this project, using the Present Value of an Annuity of $1 at Compound Interest table shown above Net Present Value A project has estimated annual net cash flows of $6,250 for two years and is estimated to cost $37,297. Assume a minimum acceptable rate of return of 20%. Use the Present Value of an Annuity of $1 at Compound Interest table below Present Value of an Annuity of $1 at Compound Interest 10% 20% 12% 0.943 0.909 0.893 0.870 0.833 1.690 2.402 3.465 3.170 3.0372.855 2.589 4.212 3.791 3.6053.352 2.991 6% Year 15% 1.626 2 1.833 1.736 1.528 2.673 2.283 2.106 2.487 4 6 4.917 4.355 111 3.784 3.326 60 5.582 4.868 4.5644.1 3.605 8 9 10 6.210 5.335 4.968 4.4873.837 5.328 5.650 6.802 5.759 4.772 4.031 7.360 6.145 5.019 4.192 Determine (1) the net present value of the project (if required, round to the nearest dollar) and (2) the present value index (rounded to two decimal places). If required, use the minus sign to indicate a negative net present value. (1) Net present value of the project (2) Present value index Cash Payback Period A project has estimated annual net cash flows of $30,000. It is estimated to cost $192,000 Determine the cash payback period. If required, round your answer to one decimal place years Average Rate of Return Determine the average rate of return for a project that is estimated to yield total income of $312,480 over three years, has a cost of $772,500, and has a $95,500 residual value. Round to the nearest whole number Feedback Check My Work Divide the estimated average annual income by the average investment. Investment cost plus residual value, divided by two, equals average investment Learning Objective2