Aria Acoustics, Incorporated (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:Year12345Unit Sales74, 00087, 000106, 25098, 50067, 800Production of the implants will require $1,750,000 in net working capital to start and additional net working capital investmentseach year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $3,700,000 per year,variable production costs are $260 per unit, and the units are priced at $390 each. The equipment needed to begin productionhas an installed cost of $17,500,000. Because the implants are intended for professional singers, this equipment is consideredindustrial machinery and thus qualifies as seven-year MACRS property. In five years, this equipment can be sold for about 20percent of its acquisition cost. The tax rate is 25 percent and the required return is 17 percent. MACRS schedulea. What is the NPV of the project?Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.b. What is the IRR?Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16

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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