Question

Calculate Cash Flows Nature's 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 8,900 units at $46 each. The new manufacturing equipment will cost $173,500 and is expected to have a 10-year life and $13,300 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 $7.8 Direct materials 25.6 1.8 Fixed factory overhead-depreciation Variable factory overhead 3.9 Total $39.1 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.

Answer 1

Natures Way Inc Net Cash Flows Workings Year 1 Particulars Year 2 to 9 Last Year Initial Investment -173500 $ $ $ Operating Cash flows Annual Revenue Less-Selling Expenses Less-Cost to manufacture Net Operating Cash Flows 409400 -20470 -347990 40940 3275200 -163760 -2783920 327520 409400 -20470 -347990 40940 -132560 327520 Total for year 1 Total for year 2 to 9 Residual Value Total for last year 13300 54240