Aria Acoustics, Inc., (AAI) projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit...

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Aria Acoustics, Inc., (AAI) projects unit sales for a newseven-octave voice emulation implant as follows:
Year Unit Sales
1 113,000
2 132,000
3 120,000
4 103,000
5 89,000

Production of the implants will require $2,250,000 in net workingcapital to start and additional net working capital investmentseach year equal to 25 percent of the projected sales increase forthe following year. Total fixed costs are $1,450,000 per year,variable production costs are $235 per unit, and the units arepriced at $355 each. The equipment needed to begin production hasan installed cost of $28,000,000. Because the implants are intendedfor professional singers, this equipment is considered industrialmachinery and thus qualifies as seven-year MACRS (MACRS Table)property. In five years, this equipment can be sold for about 20percent of its acquisition cost. AAI is in the 40 percent marginaltax bracket and has a required return on all its projects of 16percent.

What is the NPV of the project?
What is the IRR of the project?

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Aria Acoustics, Inc., (AAI) projects unit sales for a newseven-octave voice emulation implant as follows:YearUnit Sales1113,0002132,0003120,0004103,000589,000Production of the implants will require $2,250,000 in net workingcapital to start and additional net working capital investmentseach year equal to 25 percent of the projected sales increase forthe following year. Total fixed costs are $1,450,000 per year,variable production costs are $235 per unit, and the units arepriced at $355 each. The equipment needed to begin production hasan installed cost of $28,000,000. Because the implants are intendedfor professional singers, this equipment is considered industrialmachinery and thus qualifies as seven-year MACRS (MACRS Table)property. In five years, this equipment can be sold for about 20percent of its acquisition cost. AAI is in the 40 percent marginaltax bracket and has a required return on all its projects of 16percent. What is the NPV of the project?What is the IRR of the project?