Project Evaluation $($LO$2)$ Aylmer$-$in$-$You $($AIY$)$ Inc. projects unit sales for a newopera tenor emulation implant as follows:YearUnit Sales$1107,0002123,0003134,0004156,000595,500$Page $386$Production of the implants will require $$800,000$ in net working capital to start and additional net working capital investments each year equal to $40\%$ of the projected sales increase for the following year. $($Because sales are expected to fall in Year $5,$ there is no NWC cash flow occurring for Year $4.)$ Total fixed costs are $$192,000$ per year, variable production costs are $$295$ per unit, and the units are priced at $$395$ each. The equipment needed to begin production has an installed cost of $$19\mathrm{.}5$ million. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus falls into Class $8$ for tax purposes $(20\%).$ In five years, this equipment can be sold for about $30\%$ of its acquisition cost. AlY is in the $40\%$ marginal tax bracket and has a required return on all its projects of $23\%.$ Based on these preliminary project estimates, what is the NPV of the project? What is the IRR?

Project Evaluation $($LO$2)$ Aylmer$-$in$-$You $($AIY$)$ Inc. projects unit sales for a new opera tenor emulation implant as follows:

$\backslash$table$[[$Year$,$Unit Sales$],[1,107,000],[2,123,000],[3,134,000],[4,156,000],[5,95,500]]$

Page $386$

Production of the implants will require $$800,000$ in net working capital to start and additional net working capital investments each year equal to $40\%$ of the projected sales increase for the following year. $($Because sales are expected to fall in Year $5,$ there is no NWC cash flow occurring for Year $4.)$ Total fixed costs are $$192,000$ per year, variable production costs are $$295$ per unit, and the units are priced at $$395$ each. The equipment needed to begin production has an installed cost of $$19\mathrm{.}5$ million. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus falls into Class $8$ for tax purposes $(20\%).$ In five years, this equipment can be sold for about $30\%$ of its acquisition cost. AIY is in the $40\%$ marginal tax bracket and has a required return on all its projects of $23\%.$ Based on these preliminary project estimates, what is the NPV of the proiect? What is the IRR?