Determine Cash Flows Natural Foods 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 8,700 units at $40 each. The nes manufacturing equipment will cost $141,300 and is expected to have a 10-year life and a $10,800 residual value. Selling expenses related to the new product are expected to be 4% of sales revenue. The c 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 answers to the nearest dollar. Natural Foods Inc. Net Cash Flows Year 1 Years 2-9 Last Year Initial investment Operating cash flows: Annual revenues $4 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
Determine Cash Flows Natural Foods 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 8,700 units at $40 each. The nes manufacturing equipment will cost $141,300 and is expected to have a 10-year life and a $10,800 residual value. Selling expenses related to the new product are expected to be 4% of sales revenue. The c 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 answers to the nearest dollar. Natural Foods Inc. Net Cash Flows Year 1 Years 2-9 Last Year Initial investment Operating cash flows: Annual revenues $4 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Capital Investment Analysis: Natural Foods Inc.
Transcribed Image Text:Determine Cash Flows
Natural Foods 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 8,700 units at $40 each. The new
manufacturing equipment will cost $141,300 and is expected to have a 10-year life and a $10,800 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
$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 answers to the nearest 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
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