1. How sensitive is the NPV to changes in the price of the new smartphone? Shelley Couts, the owner of Jamberoo Republic Electronics, has received the capital budgeting analysis from Jay McCanless for the new smartphone the company is considering. Shelley is pleased with the results, but she still has concerns about the new smartphone. Jamberoo Republic has used a small market research firm for the past 20 years, but recently the founder of that firm has retired. Because of this, Shelley is not convinced the sales projections presented by the market research firm are entirely accurate.

Additionally, because of rapid changes in technology, she is concerned that a competitor may enter the market. This would likely force Jamberoo Republic to lower the sales price of its new smartphone. For these reasons, she has asked Jay to analyse how changes in the price of the new smartphone and changes in the quantity sold will affect the NPV of the project.