7 14.32 points Problem 6-32 Project Evaluation Aria Acoustics, Incorporated (AAI), projects unit sales for a new 7-octave voice emulation implant as follows: Year Unit Sales 1 75,000 2 80,400 eBook: 3 86,200 4 83,300 5 70,300 Hint 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 10 percent of the projected sales increase for the following year. Total fixed costs are $3,900,000 per year, variable production costs are $145 per unit, and the units are priced at $327 each. The equipment needed to begin production has an installed cost of $18,700,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as 7-year MACRS property. In five years, this equipment can be sold for about 15 percent of its acquisition cost. The tax rate is 25 percent and the required return is 19 percent. (MACRS schedule) a. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. NPV b. IRR Table 6.3 Depreciation under Modified Accelerated Cost Recovery System (MACRS) Recovery Period Class Year 3 Years 5 Years 7 Years 10 Years 15 Years 20 Years 1 .3333 .2000 .1429 .1000 .0500 .03750 2 .4445 .3200 .2449 .1800 .0950 .07219 3 .1481 .1920 .1749 .1440 .0855 .06677 4 .0741 .1152 .1249 .1152 .0770 .06177 5 .1152 .0893 .0922 .0693 .05713 6 .0576 .0892 .0737 .0623 .05285 7 .0893 .0655 0590 .04888 8 0446 .0655 .0590 .04522 9 .0656 .0591 .04462 10 .0655 .0590 .04461 11 .0328 .0591 .04462 12 .0590 .04461 13 .0591 .04462 14 .0590 .04461 15 .0591 .04462 16 .0295 .04461 17 .04462 18 .04461 19 20 .04462 21 .04461 .02231 Depreciation is expressed as a percentage of the asset's initial cost. These schedules are based on IRS Publication 946, en