Aday Acoustics, Inc., projects unit sales for a new 7-octave voice emulation implant as follows: Year Unit Sales 1 75,000 2 80,400 3 86,200 4 83,300 5 70,300 Production...

70.2K

Verified Solution

Question

Finance

Aday Acoustics, Inc., projects unit sales for a new 7-octavevoice emulation implant as follows:
Year Unit Sales
1 75,000
2 80,400
3 86,200
4 83,300
5 70,300
Production of the implants will require $1,500,000 in networking capital to start and additional net working capitalinvestments each year equal to 10 percent of the projected salesincrease for the following year. Total fixed costs are $3,900,000per year, variable production costs are $145 per unit, and theunits are priced at $327 each. The equipment needed to beginproduction has an installed cost of $18,700,000. Because theimplants are intended for professional singers, this equipment isconsidered industrial machinery and thus qualifies as 7-year MACRSproperty. In five years, this equipment can be sold for about 15percent of its acquisition cost. The company is in the 25 percentmarginal tax bracket and has a required return on all its projectsof 19 percent. MACRS schedule.

What is the NPV of the project? (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)
What is the IRR of the project? (Do not roundintermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)

Answer & Explanation Solved by verified expert

4.3 Ratings (729 Votes)

AnswerNPV of See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Aday Acoustics, Inc., projects unit sales for a new 7-octavevoice emulation implant as follows:YearUnit Sales175,000280,400386,200483,300570,300Production of the implants will require $1,500,000 in networking capital to start and additional net working capitalinvestments each year equal to 10 percent of the projected salesincrease for the following year. Total fixed costs are $3,900,000per year, variable production costs are $145 per unit, and theunits are priced at $327 each. The equipment needed to beginproduction has an installed cost of $18,700,000. Because theimplants are intended for professional singers, this equipment isconsidered industrial machinery and thus qualifies as 7-year MACRSproperty. In five years, this equipment can be sold for about 15percent of its acquisition cost. The company is in the 25 percentmarginal tax bracket and has a required return on all its projectsof 19 percent. MACRS schedule. What is the NPV of the project? (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)What is the IRR of the project? (Do not roundintermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)