Question

# Calculate Cash Flows Out of Eden, Inc., is planning to invest in new manufacturing equipment to...

Calculate Cash Flows

Out of Eden, 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 7,500 units at \$50 each. The new manufacturing equipment will cost \$154,300 and is expected to have a 10-year life and \$11,800 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 \$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.

 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 \$

Check My Work

 Out of Eden, Inc. Net Cash Flows Year 1 Years 2-9 Last Year Initial investment -154300 Operating cash flows: Annual revenues 375000 3000000 375000 Selling expenses -18750 -150000 -18750 Cost to manufacture -318750 -2550000 -318750 Net operating cash flows 37500 300000 37500 Total for Year 1 -116800 Total for Years 2-9 300000 Residual value 11800 Total for last year 49300 Total Cash flow in 10 years = -116800+300000+49300 232500 Note- Best effort have been made to answer the question correctly, in case of any discrepencies kindly comment and i will try to resolve it as soon as possible. Please provide positive feedback.

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