Aria Acoustics, Incorporated (AAI), projects unit sales for a new 7-octave voice emulationimplant as follows:Year Unit Sales1234523572,30077,70082,60080,60066,700Production of the implants will require $1,410,000 in net working capital to start andadditional net working capital investments each year equal to 10 percent of theprojected sales increase for the following year. Total fixed costs are $3,450,000 per year,variable production costs are $136 per unit, and the units are priced at $318 each. Theequipment needed to begin production has an installed cost of $17,800,000. Becausethe implants are intended for professional singers, this equipment is consideredindustrial machinery and thus qualifies as 7-year MACRS property. In five years, thisequipment can be sold for about 15 percent of its acquisition cost. The tax rate is 21percent and the required return is 15 percent. (MACRS schedule)a. What is the NPV of the project? (Do not round intermediate calculations and roundyour answer to 2 decimal places, e.g., 32.16.)b. What is the IRR of the project? (Do not round intermediate calculations and enteryour answer as a percent rounded to 2 decimal places, e.g., 32.16.)a. NPVb. IRR

Capital budgeting, often referred to as investment appraisal or capital expenditure (CAPEX)…

Answered: Aria Acoustics, Incorporated (AAI),…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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