Question

An investment (equipment) costs $217,000 cash in its first year of operation and it is expected to have a residual value of $20,000 at the end of its four-year useful life. The equipment produces a product that is expected to generate annual sales of 3,500 units at a price of $50 per unit. The product’s manufacturing cost per unit is $42.00 including $8.40 per unit for factory depreciation.

a) Calculate this investment’s net annual cash flow for its first year of operation. b) Calculate this investment’s net annual cash flow for its fourth (final) year of operation.

Answer #1

a) Calculate net annual Cash flow for its first year of operation

Revenue (3500*50) | 175000 |

Cost (42-8.4)*3500 | -117600 |

Net income | 57400 |

Less: Initial investment | -217000 |

Net annual Cash flow for its first year of operation | -159600 |

b) Calculate net annual Cash flow for its fourth year of operation

Revenue (3500*50) | 175000 |

Cost (42-8.4)*3500 | -117600 |

Net income | 57400 |

Add: Residual value | 20000 |

Net annual Cash flow for its fourth year of operation | 77400 |

A 7-year project is expected to provide annual sales of $217,000
with costs of $97,000. The equipment necessary for the project will
cost $355,000 and will be depreciated on a straight-line method
over the life of the project. You feel that both sales and costs
are accurate to +/-10 percent. The tax rate is 34 percent. What is
the annual operating cash flow for the worst-case scenario?

An investment is expected to generate annual cash flows forever.
The first annual cash flow is expected in 1 year and all subsequent
annual cash flows are expected to grow at a constant rate annually.
We know that the cash flow expected in 3 year(s) from today is
expected to be 1,420 dollars and the cash flow expected in 9 years
from today is expected to be 2,660 dollars. What is the cash flow
expected to be in 5 years...

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 7,300 units at $52
each. The new manufacturing equipment will cost $158,100 and is
expected to have a 10-year life and a $12,100 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...

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 6,400 units at $48
each. The new manufacturing equipment will cost $124,800 and is
expected to have a 10-year life and a $9,600 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...

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 7,300 units at $52
each. The new manufacturing equipment will cost $158,100 and is
expected to have a 10-year life and a $12,100 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...

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 5,000 units at $18 each. The new manufacturing
equipment will cost $120,000 and is expected to have a 10-year life
and a $17,000 residual value. Selling expenses related to the new
product are expected to be 3% of sales revenue. The cost to
manufacture the product includes the...

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
8,000 units at $54 each. The new manufacturing equipment will cost
$181,900 and is expected to have a 10-year life and a $13,900
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...

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 9,700 units at $42
each. The new manufacturing equipment will cost $168,100 and is
expected to have a 10-year life and a $12,900 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...

An investment is expected to generate annual cash flows forever.
The first annual cash flow is expected in 1 year and all subsequent
annual cash flows are expected to grow at a constant rate annually.
We know that the cash flow expected in 4 years from today is
expected to be $7500 and the cash flow expected in 5 years from
today is expected to be $9000. What is the cash flow expected to be
in 2 years from today?

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 7,200 units at $40
each. The new manufacturing equipment will cost $117,000 and is
expected to have a 10-year life and $9,000 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...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 18 minutes ago

asked 26 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago