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4. Aguilera Acoustics, Inc. (AAI), projects unit sales for a new voice emulation implant as follows: 30 Points Year Unit Sales 1 180 2 200

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4. Aguilera Acoustics, Inc. (AAI), projects unit sales for a new voice emulation implant as follows: 30 Points Year Unit Sales 1 180 2 200 3 220 4 240 5 190 Net working capital levels each year equals to 15% of the projected sales. Total fixed costs are $180 per year, variable costs are $5 per unit, and the units are priced at $7 each. The equipment has an installed cost of $450 and will be depreciated with a seven-year MACRS schedule. In five years, this equipment can be sold for about 25% of its acquisition cost. AAI is in the 21% marginal tax bracket and has a required return of 15%. Should AAI go ahead with the project? MACRS Schedule Year Seven-Year 1 14.29% 2 24.49 17.49 12.49 5 8.93 6 8.92 7 8.93 4.46 3 4 8

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