PROBLEM $2$

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

$\backslash$table$[[$Year$,$Unit Sales$],[1,115,000],[2,134,000],[3,122,000],[4,105,000],[5,91,000]]$

Production of the implants will require $$2,350,000$ in net working capital to start and additional net working capital investments each year equal to $25$ percent of the projected sales increase for the following year. Total fixed costs are $$1,490,000$ per year, variable production costs are $$239$ per unit, and the units are priced at $$359$ each. The equipment needed to begin production has an installed cost of $$30,000,000.$ 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.

What are operating cash flows, change in net working capital, capital spending, and total cash flow for each year of the project? $($A negative answer should be indicated by a minus sign. Leave no cells blank $-$ be certain to enter $"0"$ wherever required. Do not round intermediate calculations and round your answers to the nearest whole number, e$.$g$.,32.)$

Year

OCF

Chang in

NWC

Capita

spendil

ng

Total

cash

flow

What is the NPV of the project? $($Do not round intermediate calculations and round your answer to $2$ decimal places., e$.$g$.,32\mathrm{.}16.)$

Net present value

$

What is the IRR? $($Do not round intermediate calculations and enter your answer as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

Internal rate of return $\%$