Calculate Cash Flows Out of Eden, Inc., is planning to invest in new manufacturi
ID: 2457318 • Letter: C
Question
Calculate Cash Flows
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 9,300 units at $42.00 each. The new manufacturing equipment will cost $161,200 and is expected to have a 10-year life and $12,400 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:
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.
Direct labor $7.10 Direct materials 23.40 Fixed factory overhead-depreciation 1.60 Variable factory overhead 3.60 Total $35.70 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 yearExplanation / Answer
Out of Eden,Inc
Net cash flows
Year 1 Years2-9 Last year
Initial Investment $161,200 - -
Operating cash flows :-
Annual Revenues $390,600 $3,124,800 $390,600
Selling expenses-5% of revenue $ 19,530 $ 156,240 $ 19,530
Cost to manufacture $ 332,010 $2,656,080 $ 332,010
Net operating cash flows $ 39,060 $ 312,480 $ 39,060
Total for year 1 -$ 122,140
Total for years 2-9 $ 190,340
Residual value $ 12,400
Total for last year $241,800
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