Out of Eden, Inc., is planning to invest in new manufacturing equipment to make

Question

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 5,800 units at $30.00 each. The new manufacturing equipment will cost $69,100 and is expected to have a 10-year life and $5,300 residual value. Selling expenses related to the new product are expected to be 4% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis:

Direct labor $5.10

Direct materials 16.70

Fixed factory overhead-depreciation 1.10

Variable factory overhead 2.60

Total $25.50

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.

Explanation / Answer

Particulars Year 1 Year 2-9 Last Year Initial Investment      69,100.00                        -                       -   Operating Cash Flows Revenues 1,74,000.00 13,92,000.00 1,74,000.00 Selling expenses        6,960.00        55,680.00        6,960.00 Cost To manufacture 1,47,900.00 11,83,200.00 1,47,900.00 Net Operating Cash flows    -49,960.00     1,53,120.00      19,140.00 Total For Year 1    -49,960.00                        -                       -   Total For Year 2-9                     -       1,53,120.00                     -   Residual Value                     -                          -          5,300.00 Total For Last Year                     -                          -        24,440.00

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.