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Aguilera 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. Required: What are operating cash flows, change in net working capital, capital spending, and total cash flow for each year of the project? (Do not round intermediate calculations. Enter a minus sign to indicate a cash outflow. Enter a zero where required. Round your answer to the nearest whole number (e.g., 32) Year 0 1 2 3 4 5 OCF $ Change in NWC Capital spending Total cash flow What is the NPV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Net present value $ What is the IRR? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Internal rate of return %
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Proposing a new venture to the management of your company
Goiânia Corporation is expecting to have EBIT next year of $11 million, with a standard deviation of $7 million. Goiânia has $35 million in bonds with coupon of 8%, selling at par, which are being retired at the rate of $2.5 million annually. Calcula..
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You own some equipment that you purchased four years ago at a cost of $287,000. The equipment is five-year property for MACRS. The MACRS rates are .2, .32, .192, .1152, .1152, .0576, for years 1 to 6, respectively. You are considering selling the equ..
A project has an initial cash outflow of $1,110 and cash inflows of $315 per year for 4 years. What is the discounted payback period at a discount rate of 9.1 percent?
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