Determine the net cash flows for the first year of project

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Question - Calculate Cash Flows - Daffodil Inc. is planning to invest in manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 120,000 units at $9 each. The new manufacturing equipment will cost $320,000, have a 10-year life, a residual value of $20,000, and will be depreciated using the straight-line method. Selling expenses related to the new product are expected to be 15% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis:

Direct labor $1.00

Direct materials 3.40

Fixed factory overhead-depreciation 0.25

Variable factory overhead 0.35

Total $5.00

Required - Determine the net cash flows for the first year of the project, Years 2-9, and for the last year of the project.

Reference no: EM132980098

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