Calculate Cash FlowsNature’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 6,700 units at $40 each. The new manufacturing equipment will cost $108,800 and is expected to have a 10-year life and $8,300 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$6.80Direct materials22.30Fixed factory overhead-depreciation1.50Variable factory overhead3.40 Total$34.00Determine 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 1Years 2-9Last YearInitial 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 $

The following calculation is done in the records of Nature’s Way to evaluate the new manufacturing equipment.Formula Sheet: Answer Sheet:

Answered: Calculate Cash Flows Nature’s Way Inc.…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 6,700 units at $40 each. The new manufacturing equipment will cost $108,800 and is expected to have a 10-year life and $8,300 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	$6.80
Direct materials	22.30
Fixed factory overhead-depreciation	1.50
Variable factory overhead	3.40
	Total	$34.00

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 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			$

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