Evaluate the npv of the project

Assignment Help Finance Basics

Reference no: EM131934008

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

Year Unit Sales

1 114,500

2 133,500

3 121,500

4 104,500

5 90,500

Production of the implants will require $1,840,000 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 $1,480,000 per year, variable production costs are $238 per unit, and the units are priced at $358 each. The equipment needed to begin production has an installed cost of $29,500,000. 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 10 percent of its acquisition cost. AAI is in the 34 percent marginal tax bracket and has a required return on all its projects of 17 percent.

What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Net present value $

What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Internal rate of return %

Reference no: EM131934008

Questions Cloud

How should the court rule on poverty points motion : What argument can be made that Poverty Point is not subject to personal jurisdiction in the court in Texas?

Establish a replicating portfolio for the option : An Arbitrage Opportunity. Based on your analysis, you have determined that a particular stock will either increase by 50% or decrease by 50% in one year.

Find market rate of interest associated with perpetuity : Arnold buys a perpetuity for his daughter that pays $1311/year and costs him $14,713.80. What is the market rate of interest associated with this perpetuity?

Some combination of the two : You plan to invest in Stock X, Stock Y, or some combination of the two. determine the betas of stock X and stock Y.

Evaluate the npv of the project : Production of the implants will require $1,840,000 in net working capital to start and additional net working capital investments each year equal to 20 percent.

Prepare a design brief for your training unit : Prepare a design brief for your instructional or training unit.A statement of the instructional problem the unit will address.

How many shares are outstanding : The Argentina Fund has $305 million in assets and sells at a 5.7 percent discount to NAV. If the quoted share price for this closed-end fund is $20.14.

What is your profit per dollar invested : APT: Say a given market index (M) is a well-diversified portfolio and has an expected return of 15%. Deviations from this expected return (rM - 15%).

Should employers increase salaries and employee benefit : The State of California, like many government employers, is increasing employee salaries, but also increasing employee contributions to benefits.

User Account

All Pages