Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:
Year | Unit Sales | |||
1 | 72,000 | |||
2 | 85,000 | |||
3 | 99,000 | |||
4 | 94,000 | |||
5 | 75,000 | |||
Production of the implants will require $1,510,000 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 $1,410,000 per year, variable production costs are $220 per unit, and the units are priced at $335 each. The equipment needed to begin production has an installed cost of $20,100,000. 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 15 percent of its acquisition cost. AAI is in the 30 percent marginal tax bracket and has a required return on all its projects of 17 percent. Refer to Table 8.3.
What is the IRR? (Do not round intermediate calculations. Enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
IRR %hat is the NPV of the project? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.,
32.16.) NPV $
NPV AND IRR: | |||||||||||||
Year | cash outflow | Revenue | variable cost | Fixed cost | Dep. Rate | Dep. Amount | IBT | Tax | Cash Inflow | Discount 17% | PV | Dis 18% (for IRR) | PV-18% |
0 | -20100000 | 0 | -20100000 | 1 | -20100000 | ||||||||
0 | -1510000 | 0 | -1510000 | 1 | -1510000 | ||||||||
1 | -435500 | 24120000 | 15840000 | 1410000 | 14.29% | 2872290 | 3997710 | 1199313 | 5235187 | 0.855 | 4476085 | 0.847 | 4434203 |
2 | -469000 | 28475000 | 18700000 | 1410000 | 24.49% | 4922490 | 3442510 | 1032753 | 6863247 | 0.731 | 5017034 | 0.718 | 4927811 |
3 | 33165000 | 21780000 | 1410000 | 17.49% | 3515490 | 6459510 | 1937853 | 8037147 | 0.624 | 5015180 | 0.609 | 4894623 | |
4 | 31490000 | 20680000 | 1410000 | 12.49% | 2510490 | 6889510 | 2066853 | 7333147 | 0.534 | 3915900 | 0.516 | 3783904 | |
5 | 25125000 | 16500000 | 1410000 | 8.93% | 1794930 | 5420070 | 1626021 | 5588979 | 0.456 | 2548574 | 0.437 | 2442384 | |
Working Capi | 2414500 | 0.456 | 1101012 | 0.437 | 1055137 | ||||||||
Salvage | 3015000 | 904500 | 2110500 | 0.456 | 962388 | 0.437 | 922289 | ||||||
NPV | 1426173 | ||||||||||||
PV for IRR | 23036173 | 22460350 | |||||||||||
IRR = 17% + [(23036173-21610000)/(23036173-22460350)]*(18-17)% | |||||||||||||
IRR = 17% + 2.48% = 19.48% |
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year AM Unit Sales 78,000 91,000 105,000 100,000 81,000 Production of the implants will require $1,570,000 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 $1,470,000 per year, variable production costs are $250 per unit, and the units are priced at $365...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 73,000 2 86,000 3 105,000 4 97,000 5 67,000 Production of the implants will require $1,500,000 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 $3,200,000 per year, variable production costs are $255 per unit, and the units...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year WN Unit Sales 71,500 87.800 104,300 89,200 75,300 Production of the implants will require $1.5 million 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 $2.15 million per year, variable production costs are $230 per unit, and the units are priced...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year NM Unit Sales 73,800 86,800 106,000 98,200 67,700 Production of the implants will require $1,700,000 in net working capital to start and additional networking capital investments each year equal to 10 percent of the projected sales increase for the following year. Total fixed costs are $3,600,000 per year, variable production costs are $259 per unit, and the units are priced at $387 each....
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows Year 2 4 Unit Sales 73,000 86,000 105,000 97,000 67,000 5 Production of the implants will require $1,500,000 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 $3,200,000 per year, variable production costs are $255 per unit, and the units are priced...
Aria Acoustics, Inc., (AAI) projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 114,500 2 133,500 3 121,500 4 104,500 5 90,500 Production of the implants will require $1,840,000 in net working capital to start and additional net working capital investments each year equal to 20 percent of the projected sales increase for the following year. Total fixed costs are $1,480,000 per year, variable production costs are $238 per unit, and the units...
25 Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year points FNM to Unit Sales 75,800 88,800 108,500 101,200 68,700 Skipped eBook Print References Production of the implants will require $2,200,000 in net working capital to start and additional networking capital investments each year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $4,600,000 per year, variable production costs are $269 per unit, and...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 75,000 2 88,000 3 107,500 4 100,000 5 68,300 Production of the implants will require $2,000,000 in net working capital to start and additional networking capital investments each year equal to 10 percent of the projected sales increase for the following year. Total fixed costs are $4,200,000 per year, variable production costs are $265 per unit, and the units are...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year points -NM Unit Sales 73,000 86,000 105,000 97,000 67,000 Skipped eBook Print References Production of the implants will require $1,500,000 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 $3,200,000 per year, variable production costs are $255 per unit, and the...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 74,600 87,600 107.000 99,400 68,100 Production of the implants will require $1,900,000 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 $4,000,000 per year, variable production costs are $263 per unit, and the units are priced at $399 each....