FIN - Aria Acoustics, Inc. (AAI)

Question # 00052585 Posted By: expert-mustang Updated on: 03/07/2015 01:02 PM Due on: 03/18/2015
Subject Finance Topic Finance Tutorials:
Question
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Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:

Year Unit Sales
1 80,000
2 93,000
3 107,000
4 102,000
5 83,000
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Production of the implants will require $1,590,000 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 $1,490,000 per year, variable production costs are $260 per unit, and the units are priced at $375 each. The equipment needed to begin production has an installed cost of $20,900,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as seven-year MACRS property. In five years, this equipment can be sold for about 25 percent of its acquisition cost. AAI is in the 30 percent marginal tax bracket and has a required return on all its projects of 19 percent. Table 8.3.


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

NPV $
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Tutorials for this Question
  1. Tutorial # 00049745 Posted By: expert-mustang Posted on: 03/07/2015 01:02 PM
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