Aguilera Acoustics, Inc., (AAI) projects unit sales for a new seven-octave voice emulation implant as follows:

Year	Unit Sales
1	109,000
2	128,000
3	116,000
4	99,000
5	85,000

Production of the implants will require $2,300,000 in net working capital to start and additional net working capital investments each year equal to 25 percent of the projected sales increase for the following year. Total fixed costs are $1,370,000 per year, variable production costs are $227 per unit, and the units are priced at $347 each. The equipment needed to begin production has an installed cost of $24,000,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as seven-year MACRS (MACRS Table) property. In five years, this equipment can be sold for about 20 percent of its acquisition cost. AAI is in the 40 percent marginal tax bracket and has a required return on all its projects of 16 percent.

Year	1
Income Statement
Unit Sales
Sales
Variable Costs
Fixed Costs
Depreciation
EBIT
Taxes
Net Income
Depreciation
Operating CF
Net Cash Flows
OCF
Change in NWC
Inv/CapEx/Sale proceeds
Total Cash Flow
Equipment book value
Beg year
Depreciation
End year
Net Present Value
IRR