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Project Evaluation [LO1] Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:

Year Unit Sales 1 84,000 2 98,000 3 113,000 4 106,000 5 79,000

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 $3,400,000 per year, variable production costs are $265 per unit, and the units are priced at $395 each. The equipment needed to begin production has an installed cost of $17,000,000. 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 20 percent of its acquisition cost. AAI is in the 35 percent marginal tax bracket and has a required return on all its projects of 18 percent. Based on these preliminary project estimates, what is the NPV of the project? What is the IRR?

NET CASH FLOW?

Year 1 unit sales	84,000
Year 2 unit sales	98,000
Year 3 unit sales	113,000
Year 4 unit sales	106,000
Year 5 unit sales	79,000
Initial NWC	$ 1,500,000
Additional NWC/year	15%
Fixed costs	$ 3,400,000
Variable cost per unit	$ 265
Unit price	$ 395
Equipment cost	$ 17,000,000
Salvage value (% of price)	20%
Tax rate	35%
Required return	18%
MACRS depreciation	14.29%
	24.49%
	17.49%
	12.49%
	8.93%
Requirement:	Fill t blocks with formuals or excel functions only (directly input number would result 0 point for the cell).
	Payback period can be learnt in second sheet (payback)
Year	0	1	2	3	4	5
NWC	$ 1,500,000
Ending book value	$ 17,000,000
Sales		$ 33,180,000
Variable costs		22,260,000
Fixed costs		3,400,000
Depreciation		2,429,300
EBIT		$ 5,090,700
Taxes		1,781,745
Net income		$ 3,308,955
Depreciation		2,429,300
Operating cash flow		$ 5,738,255
Net cash flows
Operating cash flow	$ -	$ 5,738,255
Change in NWC	(1,500,000)
Capital spending	(17,000,000)	-	-	-	-
Total cash flow	$ (18,500,000)
Cumulative cash flow	$ (18,500,000.00)
Payback calculation
Net present value
Internal rate of return
Payback period