Out of Eden, Inc., is planning to invest in new manufacturing equipment to make
ID: 2498640 • Letter: O
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 9,100 units at $52.00 each. The new manufacturing equipment will cost $197,100 and is expected to have a 10-year life and $15,100 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:
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 Direct materials Fixed factory overhead-depreciation Variable factory overhead $8.80 28. 2.00 4.50 $44.20 TotalExplanation / Answer
Year Year-2-9 Last Year Initial Investment -197100 Operating Cash Flows Annual Revenues 473200 473200 473200 Selling Expenses Cost to Manufacture -401280 -401280 -401280 Net Operating Cash Flows -125180 71920 71920 Total for year 1 -125180 Total for Year 2-9 575360 Residual Value 15100 Total for Last Year 158940
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