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 7,600 units at $52 each. The new manufacturing equipment will cost $164,600 and is expected to have a 10year life and a $12,600 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 perunit basis:
Direct labor  $8.80  
Direct materials  28.90  
Fixed factory overheaddepreciation  2.00  
Variable factory overhead  4.50  
Total  $44.20 
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 29  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  $ 
Natural Foods Inc. 

Net Cash Flows 

Year 1 
Years 29 
Last Year 

Initial investment 
(164,600) 

Operating cash flows: 

Annual revenues (7600 X52) 
395,200 
395,200 
395,200 
Selling expenses 5% 
(19,760) 
(19,760) 
(19,760) 
Cost to manufacture (7600X(44.202.00) (net of Depreciation) 
(320,720) 
(320,720) 
(320,720) 
Net operating cash flows 
54,720 
54,720 
54,720 
Total for Year 1 
(109,880) 

Total for Years 29 
54,720 

Residual value 
12,600 

Total for last year 
67,320 
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