Aguilera Acoustics Inc. (AAI) projects unit sales for a new seven-octave voice emulation implant as follows:
Production of the implants will require $1660000 in net working capital to start and additional net working capital investments each year
equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $1560000 per year variable production
costs are $295 per unit and the units are priced at $410 each. The equipment needed to begin production has an installed cost of $21600000.
Because the implants are intended for professional singers this equipment is considered industrial machinery and thus qualifies as seven-year
MACRS property. In five years this equipment can be sold for about 20 percent of its acquisition cost. AAI is in the 35 percent marginal tax
bracket and has a required return on all its projects of 18 percent. Refer to Table 10.7.
What is the NPV of the project? (Do not round intermediate calculations and round your final answer to 2 decimal places.
What is the IRR? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g.