Question

Determine Cash Flows Natural Foods 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 5,100 units at $34 each. The new manufacturing equipment will cost $71,800 and is expected to have a 10-year life and a $5,500 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 $5.80 Direct materials Fixed factory overhead-depreciation 18.90 1.30 2.90 Variable factory overhead Total $28.90 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. Natural Foods 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 (operating cash flow) Residual value Total for last year Check My Work 2 more Check My Work uses remaining. < Previous Next >

Answer 1

Calculate cash flow

	Year 1	Year 2-9	Year 10
Initial investment	-71800
Operating cash flows
Annual revenues	173400	173400	173400
Selling expenses	-8670	-8670	-8670
Cost to manufacture	-140760	-140760	-140760
Net operating cash flows	23970	23970	23970
Total for year 1	-47830
Total for year 2-9		191760
Residual value			5500
Total for last year			29470