Hello there, the question is attached in the file. I am able to find out how to get the other numbers except for PVCCATS. From my basic understanding, I understand that there is no salvage value in this question, so when i used the formula to calculate it, my numbers do not match. Using the formula, PVCCATS=(IdTc/d+r) x [1+0.5r]/(1+r). In my calculations, I=18,700,000, d=0.2, Tc=0.4, r=0.23 and my answer is 3,153,790.887. The solution shows PVCCATS = 2,902,121.33. I am wondering if you could help me find the value of the PVCCATS.

Thanks.

50. Project Evaluation (LO2) Aylmer-in-You (AIY) Inc. projects unit sales for a new opera tenor emulation implant as follows: Year Unit Sales 107,000 123,000 134.000 156,000 95,500 Production of the implants will require $800,000 in net working capital to start and additional net working capital investments each year equal to 40% of the projected sales increase for the following year. (Because sales are expected to fall in Year 5, there is no NWC cash flow occurring for Year 4.) Total fixed costs are $192,000 per year, variable production costs are $295 per unit, and the units are priced at $395 each. The equipment needed to begin production has an Page 385 installed cost of $19.5 million. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus falls into Class 8 for tax purposes (20%). In five years, this equipment can be sold for about 30% of its acquisition cost. AIY is in the 40% marginal tax bracket and has a required return on all its projects of 23%. Based on these preliminary project estimates, what is the NPV of the project? What is the IRR?50. (LO2) Year 2 3 4 5 Units/yr 107,000 123,000 134,000 156,000 95.500 Price/unit 395 395 395 395 395 Vcost/unit 295 295 295 295 295 Sales 42.265,000 48.585,000 52,930,000 61,620,000 37,722,500 VC 31,565,000 36.285,000 39.530.000 46,020,000 28,172.500 FC 192,000 192,000 192.000 192,000 192,000 Net Rev 10.508,000 12,108,000 13,208,000 15,408,000 9.358,000 Taxes 4.203.200 4.843.200 5.283,200 6,163,200 3.743,200 (S-C)(1-T) 6.304,800 7,264.800 7.924.800 9,244,800 5.614,800 Year 2 4 A-T Rev 6.304,800 7,264,800 7,924,800 9.244,800 5,614,800 Ch in NWC -800.000 -2,528.000 -1,738,000 -3.476.000 0 8.542,000 Cap Spend -19.500.000 5,850,000 PVCCATS 2,902,121.33 Total CF -17,397,878.67 3,776.800 5.526.800 4.448.800 9.244.800 20,006.800 Net present value = $2,861,990.17 An approximate solution for the IRR can be found by assuming that the PVCCATS is discounted at the 23% cost of capital of the firm, so that the PVCCATS value in the table is held constant. In this case: IRR = 28.691%. The alternative is to enter the data into a spreadsheet and search for the rate that produces a NPV = 0, where PVCCATS is discounted at the IRR