Aguilera Acoustics (AAI), Inc., projects unit sales for a new 7-octave voice emulation implant as follows:

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 20 percent of the projected sales increase for the following year. Total fixed costs are $750,000 per year, variable production costs are $210 per unit, and the units are priced at $330 each. The equipment needed to begin production has an installed cost of $14,000,000. 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 30 percent of its acquisition cost. AAI is in the 35 percent marginal tax bracket and has a required return on all its projects of 30 percent. Based on these preliminary project estimates, what is the NPV of the project? What is the IRR?

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Year 1 2345 Unit Sales 95,000 107,000 110,000 112,000 85,000