Reference no: EM131786344

Question - 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 9,000 units at $42 each. The new manufacturing equipment will cost 156,000 and is expected to have a 10 year life and 12,000 residual values. 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 7.00

Direct materials 23.40

Fixed factory overhead-depreciation 1.60

Variable factory overhead 3.60

Total 35.60

1. What is the net operating cash flows for years 2-9?

$378,000

$102,900

$65,100

$53,100

2. What is the net cash flows for the last year?

$378,000

$306,000

$65,100

$12,000