Free

70.2K

Verified Solution

Link Copied!

1. Determine Cash Flows

   Natural Foods Inc. is planning to invest in new manufacturingequipment to make a new garden tool. The new garden tool isexpected to generate additional annual sales of 5,000 units at $18each. The new manufacturing equipment will cost $120,000 and isexpected to have a 10-year life and a $17,000 residual value.Selling expenses related to the new product are expected to be 3%of sales revenue. The cost to manufacture the product includes thefollowing on a per-unit basis:

   Direct labor	$ 2.50
   Direct materials	3.20
   Fixed factory overhead—depreciation	2.40
   Variable factory overhead	0.90
   Total	$9.00

   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 signto indicate cash outflows. Do not round your intermediatecalculations but, if required, round your final answers to thenearest dollar.

   Natural Foods 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 (operating cash flow)		$
   Residual value
   Total for last year			$

   Feedback

   For Year 1, subtract the amount to be invested from theoperating cash flows (annual revenues less selling expenses lesscost to manufacture). For Years 2-10, subtract the selling expensesand the costs to manufacture from the annual revenues. For Year 10only, add the residual value.

Loading item

There was an error loading this item. If this continues tooccur, please contact Technical Support.

Check My Work

• Previous
• Next

• 100% Correct
• Partially Correct
• Incorrect
• Needs Instructor Grading

Basic Calculatorclose

0

UseEntBSBSpCEHomCEnd

789+

456-

123*