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Aguilera Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: 1 95000 2 105000 3 200000 4 250000 5

Aguilera Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: 1 95000 2 105000 3 200000 4 250000 5 300000 Production of the implants will require $3,200,000 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 $2,500,000 per year, variable production costs are $360 per unit, and the units are priced at $650 each. The equipment needed to begin production has an installed cost of $56,000,000. Depreciation will be charged straight line to zero basis. In five years, this equipment can be sold for about 35 percent of its acquisition cost. AAI is in the 40 percent marginal tax bracket and has a required return on all its projects of 15 percent. Based on these preliminary project estimates, what is the NPV of the project? What is the IRR?

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