Question
Calculate Cash Flows Natures Way Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The garden tool is expected
Calculate Cash Flows
Natures 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 8,800 units at $48 each. The new manufacturing equipment will cost $171,500 and is expected to have a 10-year life and $13,100 residual value. Selling expenses related to the new product are expected to be 4% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis:
Direct labor | $8.2 | |
Direct materials | 26.7 | |
Fixed factory overhead-depreciation | 1.8 | |
Variable factory overhead | 4.1 | |
Total | $40.8 |
Determine the net cash flows for the first year of the project, Years 29, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answer to the nearest dollar.
Natures 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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