Question

Cornucopia 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 4,000 units at $ 68 each. The new manufacturing equipment will cost $ 107,000 and is expected to have a 10-year life and $ 13,000 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:
Direct labor ................. $ 9.00
Direct materials .............. 36.00
Fixed factory overhead—depreciation ..... 2.35
Variable factory overhead ............ 4.65
Total .................. $ 52.00
Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project.



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  • CreatedJune 27, 2014
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