Calculate cash flows
Nature's Way 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 2,500 units at $60 each. The new manufacturing equipment will cost $227,000 and is expected to have a 10-year life and $17,000 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis:
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Direct labor
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$ 8.00
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Direct materials
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22.00
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Fixed factory overhead-depreciation
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8.40
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Variable factory overhead
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3.60
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Total
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$42.00
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Determine the net cash flows for the first year of the project, Years 2-9, and for the last year of the project.