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Calculate cash flows.

Calculate cash flows.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Calculate cash flows.

Calculate Cash Flows Nature's Way Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The garden tool is expected to generate additional annual sales of 5,600 units at $50 each. The new manufacturing equipment will cost $115,200 and is expected to have a 10-year life and $8,800 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 $8.5 Direct materials 27.8 Fixed factory overhead-depreciation 1.9 Variable factory overhead 4.3 Total $42.5 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. Nature's Way Inc. Net Cash Flows Year 1 Years 2-9 Last Year Initial investment 115,200 Operating cash flows: Annual revenues 280,000 280,000 280,000 V Selling expenses 11,200 11,200 11,200 X Cost to manufacture 227,360 X 227,360 X 227,360 X
Transcribed Image Text:Calculate Cash Flows Nature's Way Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The garden tool is expected to generate additional annual sales of 5,600 units at $50 each. The new manufacturing equipment will cost $115,200 and is expected to have a 10-year life and $8,800 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 $8.5 Direct materials 27.8 Fixed factory overhead-depreciation 1.9 Variable factory overhead 4.3 Total $42.5 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. Nature's Way Inc. Net Cash Flows Year 1 Years 2-9 Last Year Initial investment 115,200 Operating cash flows: Annual revenues 280,000 280,000 280,000 V Selling expenses 11,200 11,200 11,200 X Cost to manufacture 227,360 X 227,360 X 227,360 X
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. Nature's Way Inc. Net Cash Flows Year 1 Years 2-9 Last Year Initial investment 115,200 X Operating cash flows: Annual revenues 280,000 280,000 280,000 Selling expenses 11,200 X 11,200 X 11,200 x Cost to manufacture 227,360 X 227,360 X 227,360 X Net operating cash flows 41,440 41,440 41,440 Total for Year 1 73,760 X Total for Years 2-9 41,440 Residual value 8,800 Total for last year 50,240
Transcribed Image Text: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. Nature's Way Inc. Net Cash Flows Year 1 Years 2-9 Last Year Initial investment 115,200 X Operating cash flows: Annual revenues 280,000 280,000 280,000 Selling expenses 11,200 X 11,200 X 11,200 x Cost to manufacture 227,360 X 227,360 X 227,360 X Net operating cash flows 41,440 41,440 41,440 Total for Year 1 73,760 X Total for Years 2-9 41,440 Residual value 8,800 Total for last year 50,240
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