Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Aday Acoustics, Inc., projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 73,000 2 86,000 3 100,000 4

Aday Acoustics, Inc., projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 73,000 2 86,000 3 100,000 4 95,000 5 76,000 Production of the implants will require $1,520,000 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 $1,420,000 per year, variable production costs are $225 per unit, and the units are priced at $340 each. The equipment needed to begin production has an installed cost of $20,200,000. 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 20 percent of its acquisition cost. The company is in the 35 percent marginal tax bracket and has a required return on all its projects of 18 percent. MACRS schedule. What is the NPV of the project? What is the IRR of the project?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Investing In Fixed Income Securities Understanding The Bond Market

Authors: Gary Strumeyer

1st Edition

0471465127, 9780471465126

More Books

Students also viewed these Finance questions

Question

Why would a person fear success?

Answered: 1 week ago

Question

What is the main advantage to this tactic?

Answered: 1 week ago

Question

What administrative cost items are associated with this tactic?

Answered: 1 week ago

Question

What is the full-cost budget?

Answered: 1 week ago