Question
In: Finance
Aria Acoustics, Inc., (AAI) projects unit sales for a new seven-octave voice emulation implant as follows:...
Aria Acoustics, Inc., (AAI) projects unit sales for a new
seven-octave voice emulation implant as follows:
| Year | Unit Sales | |
| 1 | 113,000 | |
| 2 | 132,000 | |
| 3 | 120,000 | |
| 4 | 103,000 | |
| 5 | 89,000 | |
Production of the implants will require $2,250,000 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 $1,450,000 per year,
variable production costs are $235 per unit, and the units are
priced at $355 each. The equipment needed to begin production has
an installed cost of $28,000,000. 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 is the NPV of the project?
What is the IRR of the project?
Solutions
jeff jeffy answered 8 months agoRelated Solutions
Aria Acoustics, Inc., (AAI) projects unit sales for a new seven-octave voice emulation implant as follows:...
Aria Acoustics, Inc., (AAI) projects unit sales for a new
seven-octave voice emulation implant as follows:
Year
Unit
Sales
1
110,500
2
129,500
3
117,500
4
100,500
5
86,500
Production of the implants will require $1,750,000 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 $1,400,000 per year,
variable production costs are $230 per unit, and the...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:...
Aria Acoustics,
Inc. (AAI), projects unit sales for a new seven-octave voice
emulation implant as follows:
Year
Unit Sales
1
73,000
2
86,000
3
105,000
4
97,000
5
67,000
Production of
the implants will require $1,500,000 in net working capital to
start and additional net working capital investments each year
equal to 15 percent of the projected sales increase for the
following year. Total fixed costs are $3,200,000 per year, variable
production costs are $255 per unit, and the units...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:...
Aria Acoustics, Inc. (AAI), projects unit sales for a new
seven-octave voice emulation implant as follows:
Year
Unit Sales
1
90,000
2
103,000
3
117,000
4
112,000
5
93,000
Production of the implants will require $1,690,000 in net
working capital to start and additional net working capital
investments each year equal to 15 percent of the projected sales
increase for the following year. Total fixed costs are $1,590,000
per year, variable production costs are $310 per unit, and the
units...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:...
Aria Acoustics, Inc. (AAI), projects unit sales for a new
seven-octave voice emulation implant as follows:
YEAR
UNIT SALES
1
80,000
2
97,000
3
109,000
4
103,000
5
78,000
Production of the implants will require $1,600,000 in net
working capital to start and additional net working capital
investments each year equal to 15 percent of the projected sales
increase for the following year. Total fixed costs are $1,900,000
per year, variable production costs are $195 per unit, and the
units...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:...
Aria Acoustics, Inc. (AAI), projects unit sales for a new
seven-octave voice emulation implant as follows:
▪ The company has spent $150,000 for a marketing study to
evaluate the project. The study shows that the company will sell
75,000 units per year for 6 years. In addition, the company will
lose sales of 12,000 units per year of its high priced voice
emulation implant.
▪ The variable production costs for new voice emulation implant
are $260 per unit, and the...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:...
Aria Acoustics, Inc. (AAI), projects unit sales for a new
seven-octave voice emulation implant as follows:
Year
Unit Sales
1
76,400
2
89,400
3
109,250
4
102,100
5
69,000
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 15 percent of the projected sales
increase for the following year. Total fixed costs are $4,900,000
per year, variable production costs are $272 per unit, and the
units...
Aria Acoustics, Inc., (AAI) projects unit sales for a new seven-octave voice emulation implant as follows:...
Aria Acoustics, Inc., (AAI) projects unit sales for a new
seven-octave voice emulation implant as follows:
Year
Unit
Sales
1
113,000
2
132,000
3
120,000
4
103,000
5
89,000
Production of the implants will require $2,250,000 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 $1,450,000 per year,
variable production costs are $235 per unit, and the...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:...
Aria Acoustics, Inc. (AAI), projects unit sales for a new
seven-octave voice emulation implant as follows:
Year
Unit Sales
1
75,600
2
88,600
3
108,250
4
100,900
5
68,600
Production of the implants will require $2,150,000 in net
working capital to start and additional net working capital
investments each year equal to 10 percent of the projected sales
increase for the following year. Total fixed costs are $4,500,000
per year, variable production costs are $268 per unit, and the
units...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:...
Aria Acoustics, Inc. (AAI), projects unit sales for a new
seven-octave voice emulation implant as follows:
Year Unit Sales
1 85,000
2 98,000
3 112,000
4 107,000
5 88,000
Production of the implants will require $1,640,000 in net
working capital to start and additional net working capital
investments each year equal to 10 percent of the projected sales
increase for the following year. Total fixed costs are $1,540,000
per year, variable production costs are $285 per unit, and the...
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:...
Aria Acoustics, Inc. (AAI), projects unit sales for a new
seven-octave voice emulation implant as follows: Year Unit Sales 1
74,800 2 87,800 3 107,250 4 99,700 5 68,200
Production of the implants will require $1,950,000 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 $4,100,000
per year, variable production costs are $264 per unit, and the
units...
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