Calculate Cash Flows Out of Eden, Inc., is planning to invest in new manufacturi
ID: 2472410 • 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 9,000 units at $50.00 each. The new manufacturing equipment will cost $185,200 and is expected to have a 10-year life and $14,200 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 $8.50 Direct materials 27.80 Fixed factory overhead-depreciation 1.90 Variable factory overhead 4.30 Total $42.50 Hide Hint(s) 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 $
Explanation / Answer
units price Total Sales 9,000 50 450,000 Cost 185,200 10year salvage value 14,200 Sales 450,000 Selling expenses 22,500 Direct labor 76,500 Direct material 250,200 Fixed overhead 17,100 variable overhead 38,700 Net cashflow 45,000 Year Investment Income salvage value Total cashflow 0 (185,200) (185,200) 1 45,000 45,000 2 45,000 45,000 3 45,000 45,000 4 45,000 45,000 5 45,000 45,000 6 45,000 45,000 7 45,000 45,000 8 45,000 45,000 9 45,000 45,000 10 45,000 14,200 59,200
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