Question

Calculate Cash Flows Nature's Way 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 9,200 units at $50 each. The new manufacturing equipment will cost $189,300 and is expected to have a 10-year life and $14,500 residual value. Selling expenses related too 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 $8.50 Direct materials 27.80 Fixed factory overhead-depreciation 1.90 Variable factory overhead 4.30 $42.50 Total 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 answer to the nearest dollar. Out of Eden, 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

Answer 1

Year 1 Years 2-9 Last year -189300 Particulars 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 460000 3680000 460000 -23000 -184000 23000 -391000 -3128000 -391000 46000 368000 46000 -143300 368000 14500 60500

Annual revenue indicates the total sales made by the Eden, Inc. Selling expenses is calculated as a percentage from the annual revenues and the cost of Manufacture is calculated by Multiplying the goods sold by the cost of producing per unit.

Cash outflows are indicated by the Minus sign.