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Please answer the following question USF Inc. projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 84,000 2

Please answer the following question

USF Inc. projects unit sales for a new seven-octave voice emulation implant as follows:

Year

Unit Sales

1

84,000

2 98,000
3 113,000
4 106,000
5 79,000

Production of the implants will require $1,500,000 in net working capital in Year 0 and networking capital requirements (needs) for each year are equal to 15 percent of the projected sales for that year. Total fixed costs are $3,400,000 per year, variable production costs are $265 per unit, and the units are priced at $395 each. The equipment needed to begin production has an installed cost of $17,000,000. The firm will use a straight line depreciation method across the 5 years. USF is in the 35 percent marginal tax bracket and has a required return on all of its projects of 18 percent. Based on these preliminary project estimates, what is the NPV and IRR of the project?

Check Figures

Year FCFs
0

-18,500,00.00

1 2,601,000.00
2

Not Given

3 7,639,750.00
4 8,351,750.00
5 11,936,000.00

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