AF325: Theory of Corporate Finance Fall 2020 Assignment 5 - Making Investment Decisions Submit in Blackboard by October 15, 5:30 PM. Please use Excel to solve the assignment and submit as an excel spreadsheet. This question is based on a problem presented at the end of Chapter 10 of the textbook. Aria Acoustics, Inc. projects unit sales for a new seven-octave voice emulation implant as follows: Year 1 2 3 Unit Sales 73,000 86,000 105,000 97,000 67,000 I 4 5 Production of the implants will require $1,500,000 in networking capital to start. It is expected that networking capital requirements are not changing over the life of the project. Total fixed costs are $3,300,000 per year, variable production costs are $225 per unit, and the units are priced at $375 each. The equipment needed to begin production has an installed cost of $16,500,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as a seven-year MACRS property. In five years, this equipment can be sold for about 20 percent of the acquisition cost. The tax rate is 21 percent and the required returns is 18 percent. Based on these preliminary estimates, what is the NPV of the project? What is the IRR? 11 ty W 000 ogo AF325: Theory of Corporate Finance Fall 2020 Assignment 5 - Making Investment Decisions Submit in Blackboard by October 15, 5:30 PM. Please use Excel to solve the assignment and submit as an excel spreadsheet. This question is based on a problem presented at the end of Chapter 10 of the textbook. Aria Acoustics, Inc. projects unit sales for a new seven-octave voice emulation implant as follows: Year 1 2 3 Unit Sales 73,000 86,000 105,000 97,000 67,000 I 4 5 Production of the implants will require $1,500,000 in networking capital to start. It is expected that networking capital requirements are not changing over the life of the project. Total fixed costs are $3,300,000 per year, variable production costs are $225 per unit, and the units are priced at $375 each. The equipment needed to begin production has an installed cost of $16,500,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as a seven-year MACRS property. In five years, this equipment can be sold for about 20 percent of the acquisition cost. The tax rate is 21 percent and the required returns is 18 percent. Based on these preliminary estimates, what is the NPV of the project? What is the IRR? 11 ty W 000 ogo