Aria Acoustics, Incorporated (AAI), projects unit sales for a new 7-octave voice emulation implant as follows: Year 1 2 2345 Unit Sales 72,300 77,700 82,600 80,600 66,700 Production of the implants will require $1,410,000 in net working capital to start and additional net working capital investments each year equal to 10 percent of the projected 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. The equipment needed to begin production has an installed cost of $17,800,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as 7-year MACRS property. In five years, this equipment can be sold for about 15 percent of its acquisition cost. The tax rate is 21 percent and the required return is 15 percent. (MACRS schedule) a. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. NPV b. IRR

Danford Company, a manufacturer of farm equipment, currently produces 20,000 units of gas filters per year for use in its lawn-mower production. The costs, based on the previous year's production, are reported below. It is anticipated that gas-filter production will last five years. If the company continues to produce the product in-house, annual direct material costs will increase $3000/year (For example, annual material costs during the first production year will be $63,000.) Direct labor will also increase by $5000/year. However, variable overhead costs will increase at the rate of $2000/year and the fixed overhead will remain at its current level over the next five years. John Holland Company has offered to sell Danford 20,000 units of gas filters for $25 per unit. If Danford accepts the offer, some of the manufacturing facilities currently used to manufacture the filter could be rented to a third party for $35,000 per year. The firm's interest rate is known to be 15%. What is the…

Imperial Devices (ID) has offered to supply the state government with one model of its security screening device at “cost plus 20 percent.” ID operates a manufacturing plant that can produce 66,000 devices per year, but it normally produces 60,000. The costs to produce 60,000 devices follow:     Total Cost   Cost perDevice   Production costs:                 Materials $ 4,500,000     $ 75   Labor   9,000,000       150     Supplies and other costs that will vary with production   2,700,000       45     Indirect cost that will not vary with production   2,700,000       45     Variable marketing costs   1,800,000       30     Administrative costs (will not vary with production)   5,400,000       90     Totals $ 26,100,000     $ 435         Based on these data, company management expects to receive $522 (= $435 × 120 percent) per monitor for those sold on this contract. After completing 500 monitors, the company sent a bill (invoice) to the government for $261,000…

Revenues generated by a new fad product are forecast as follows: Year Revenues $45,000 1 2 35,000 3 25,000 4 20,000 Thereafter 0 Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $60,000 in plant and equipment.