Determine cash flows

Kauai Tools 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 $9,300$ units at $$30$ each. The new manufacturing equipment will cost $$110,800$ and is expected to have a $10-$year life and a $$8,500$ 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

Direct materials

Fixed factory overhead$-$depreciation

Variable factory overhead

Total

$$5\mathrm{.}10$

$16\mathrm{.}70$

$1\mathrm{.}10$

$2\mathrm{.}60$

$$25\mathrm{.}50$

Determine the net cash flows for the first year of the project, Years $2-9,$ 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 answers to the nearest dollar.

Kauai Tools Inc.

Net Cash Flows

Line Item Description

Year $1$

Years $2-9$

Last Year

Initial investment

Operating cash flows: