Daffodil Inc is planning to invest in manufacturing

equipment to #8940
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.........................................$1.00Direct
materials......................................3.40Fixed factory overhead-depreciation.............0.25Variable
factory overhead..........................0.35Total .................................................$5.00a. Determine
the net cash flows for the first year of the project, Years 2-9, and for the last year of the
project.b. Assume that the operating cash flows occur evenly throughout the year and that the
equipment is purchased on January 1, 20Y1. Determine when the cash payback will occur by
year, month, and day.View Solution:
Daffodil Inc is planning to invest in manufacturing equipment to

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