Nature’s Way 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 7,800 units at $54 each. The new manufacturing equipment will cost $177,400 and is expected to have a 10-year life and $13,600 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: Direct labor $9.20 Direct materials 30.00 Fixed factory overhead-depreciation 2.10 Variable factory overhead 4.60 Total $45.90 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 $fill in the blank 1 Operating cash flows: Annual revenues $fill in the blank 2 $fill in the blank 3 $fill in the blank 4 Selling expenses fill in the blank 5 fill in the blank 6 fill in the blank 7 Cost to manufacture fill in the blank 8 fill in the blank 9 fill in the blank 10 Net operating cash flows $fill in the blank 11 $fill in the blank 12 $fill in the blank 13 Total for Year 1 $fill in the blank 14 Total for Years 2-9 $fill in the blank 15 Residual value fill in the blank 16 Total for last year

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 4E: Determine cash flows Natural Foods Inc. is planning to invest in new manufacturing equipment to make...

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Calculate Cash Flows

Nature’s Way 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 7,800 units at $54 each. The new manufacturing equipment will cost $177,400 and is expected to have a 10-year life and $13,600 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:

Direct labor	$9.20
Direct materials	30.00
Fixed factory overhead-depreciation	2.10
Variable factory overhead	4.60
	Total	$45.90

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	$fill in the blank 1
Operating cash flows:
Annual revenues	$fill in the blank 2	$fill in the blank 3	$fill in the blank 4
Selling expenses	fill in the blank 5	fill in the blank 6	fill in the blank 7
Cost to manufacture	fill in the blank 8	fill in the blank 9	fill in the blank 10
Net operating cash flows	$fill in the blank 11	$fill in the blank 12	$fill in the blank 13
Total for Year 1	$fill in the blank 14
Total for Years 2-9		$fill in the blank 15
Residual value			fill in the blank 16
Total for last year			$fill in the blank 17

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