Exercise 25-4 (Algorithmic) Calculate Cash Flows

Out of Eden, 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 8,400 units at $42.00 each. The new manufacturing equipment will cost $145,600 and is expected to have a 10-year life and $11,200 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		$7.10
Direct materials		23.40
Fixed factory overhead-depreciation		1.60
Variable factory overhead		3.60
	Total	$35.70

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Determine the net cash flows for the first year of the project, Years 2