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.
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 6,200 units at $46 each. The new manufacturing equipment will cost $120,900 and is expected to have a 10-year life and a $9,300 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 | $7.80 | |
| Direct materials | 25.60 | |
| Fixed factory overhead-depreciation | 1.80 | |
| Variable factory overhead | 3.90 | |
| Total | $39.10 |
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
| Natural Foods 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 (operating cash flow) | $fill in the blank 15 | ||
| Residual value | fill in the blank 16 | ||
| Total for last year | $fill in the blank 17 |
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
