= false Out of Eden, Inc, is planning to invest in new manufacturing equipment t

Question

= false 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 will cost $123,500 and is expected to have a 10-year life and $9,500 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: 27.2 ntermediate calculations but, if required, round your final answer to the nearest dolla. Out of Eden, Inc tritial investment Annud revenues

Explanation / Answer

(1) In the absence of tax rates depreciation had no impact on the cash flow calculations. When calculating the cost to manufacture, the total cost of 27.2 should be excluded with 1.20 of depreciation as depreciation does not involve any cash outflow.

(2) Take proper care while entering minus sign, as per the instructions in the question we have to indicate cash out flow with minus sign, but your solution ( screen shots) are showing true answers without sign. If that is the case then ignore the minus signs in my answer.

Final solution is as under

(1) Cost to manufacture = 9500 Units * 26 per unit

(2) Total for Year 2 - 9 = 41800 * 8 Years = 334400

Year - 1 Year 2-9 Year 10 Initial Investment -123500 Operating cash flows Annual revenues 304000 304000 304000 Selling expenses -15200 -15200 -15200 Cost to manufacture -247000 -247000 -247000 Net Operating cash flows 41800 41800 41800 Total for Year - 1 41800 Total for Year 2-9 334400 Residual value 9500 Total for last year 51300

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