I am working on a project and need to figure out total annual cash flow. I have been given a check figure from the professor of $58,351, but am un able to get that figure.
Here is the data:
Cost of new equipment $200,000
Expected life of equipment in years 5
Disposal value in 5 years $40,000
Life production - number of cans 5,500,000
Annual production or purchase needs 1,100,000
Number of workers needed 3
Annual hours to be worked per employee 2000
Earnings per hour for employees $12.00
Annual health benefits per employee $2,500
Other annual benefits per employee-% of wages 18%
Cost of raw materials per can $0.25
Other variable production costs per can $0.05
Costs to purchase cans - per can $0.45
Required rate of return 12%
Tax rate 35%

Can someone please assist. The first answer I achieved was 24148, second was57750 and 3rd was 59343.20

This will be the computation:


Sales (1,100,000x$0.45) 495,000
Direct Materials (1,100,000 x$0.2) (275,000)
Direct Labor
Salaries (2,000x3x$12) 72,000
Health Benefits (2,500x3) 7,500
Other Benefits (Salariesx18%) 12,960 (92,460)
Other Variable Costs (1,100,00 x$.05) (55,000)
Depreciation ((200,000-40,000)/5years) (32,000)
Taxable Income 40,540
Income Tax (Taxable Income x 35%) (14,189)
Net Income 26,351
Add back: Depreciation 32,000
Net Annual Cash Flow 58,351

*Note that we add back depreciation because this is not an actual cash flow (no cash was involved in depreciating the asset over the years). Depreciation was only necessary in computing taxable and net income.

I guess the answer appears totally different after posting. The spaces are not included when displayed. Well I hope you understand the flow of computation. I guess the only questionable portion there is the (92,460), that is the total of salaries, health benefits and other benefits, you don't need to deduct this if you already deducted the direct labor breakdown on top it.