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Elis [28]
3 years ago
15

Calculate Cash FlowsNature’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 1,600 units at $75 each. The new manufacturing equipment will cost $257,000 and is expected to have a 10-year life and $17,000 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 $12.00Direct materials 30.00Fixed factory overhead—depreciation 15.00Variable factory overhead 4.50 Total $61.50Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project. Do not round your intermediate calculations but, if required, round your final answer to the nearest dollar. Use a minus sign to indicate cash outflows.
Business
1 answer:
snow_tiger [21]3 years ago
6 0

Answer:

Net cash flow for year 1 = ($217,400)

Net cash flow for year 2-9 = $39,600

Net cash flow for last year = $56,600

<u />

Explanation:

                                               Year 1           Year 2-9       Last year

Initial investment               -$257,000

<em>Annual revenue                  $120,000       $120,000     $120,000 </em>

<em>Selling expense                 -$6,000         -$6,000       -$6,000 </em>

<em>Cost of manufacture          -$74,400       -$74,400     -$74,400 </em>

Net operating cash flows   <u>$39,600</u>        <u>$39,600</u>      <u>$39,600</u>

Total for year 1                   <u>-$217,400</u>

Total for year 2-9                                      <u>$39,600</u>

Residual value                                                                <u>$17,000</u>

Total for last year                                                           <u>$56,600</u>

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