Question
Calculate Cash Flows Nature's Way Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The garden tool is expected
Calculate Cash Flows
Nature's Way Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The garden tool is expected to generate additional annual sales of 1,600 units at $75 each. The new manufacturing equipment will cost $257,000 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$12.00
Direct materials30.00
Fixed factory overheaddepreciation15.00
Variable factory overhead4.50
Total$61.50
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. Use a minus sign to indicate cash outflows.
Nature's Way Inc.
Net Cash Flows
Year 1 Years 2-9 Last Year
initial investment $
Operating cash flows:
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$
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