Case study: Chapter 9: Making Capital Investment Decisions 20 marks 1. Submission Deadline: 27th November 2021 2. The case study must be Group Maximum 3 students. 3. Please make sure the case study is using 1.5 spacing (Times New Roman). Microsoft word. 4. Write all the steps and formula in your answer. 5. Write the case study questions and answer in the same file. 6. There is NO EXTEND for submission. CHAPTER CASE Conch Republic Electronics nch Republic Electronics is a midsired electronics Camutocture located in Key West, Florida. The com pany president is Shelly Couts, who inherited the com party. The company originally repaired radios and other household appliances when it was founded more than 70 years ago. Over the years, the company has ex panded, and it is now a reputable manufacturer of vari ous specialty electronie items. Joy McCanloss, a recent MBA graduate has been hired by the company in its - sance department One of the major revenue-producing items manu- actured by Conch Republic is a smartphone. Conch Re. public currently has one smartphone model on the market and sales have been excellent. The smartphone sa unique item in that it comes in a variety of tropical colors and is preprogrammed to play Jimmy Buffett mu- However, as with any electronic item, technology hanges rapidly, and the current smartphone has limited eatures in comparison with newer models. Conch Re- ublic spent $1.2 million to develop a prototype for a ew smartphone that has all the features of the existing ne but adds new features such as Wifi tethering. The company has spent a further $250,000 for a marketing study to determine the expected sales figures for the new smartphone Conch Republic can manufacture the new smart- phone for 5210 each in variable costs. Fixed costs for the operation are estimated to run $5.3 million per year. The estimated sales volumes are 64.000, 106,000 87,000, 78,000, and 54,000 per year for each of the next five years, respectively. The unit price of the new smartphone will be $515. The necessary equipment can be purchased for $38.5 million and will be deprech ated on a seven-year MACRS schedule. It is believec the value of the equipment in five years will be $5.3 million Net working capital for the smartphones will b 20 percent of sales and will occur with the timing of th cash flows for the year ie, there is no initial outlay fi NWC). Changes in NWC thus will occur first in Year 1 w the first year's sales. Conch Republic has a 22 perce corporate tax rate and a required return of 12 percent Shelly has asked Jay to prepare a report tr answers the following questions: QUESTIONS 1. What is the payback period of the project? 2. What is the profitability index of the project? 3. What is the IRR of the project? 4. What is the NPV of the project? 5. How sensitive is the NPV to changes in the price of the new smartphone? 6. How sensitive is the NPV to changes in the quan tity sold? 7. Should Conch Republic produce the ne smartphone? 8. Suppose Conch Republic loses sales on oth models because of the introduction of the ne model. How would this affect your analysis