Chapter 10 Making Capital Investment Decisions 349 have been excellent. The pho it comes in a variety of tropical colors to play Jimmy Buffett music. However, as with any elec of the existing smart tronic item, technology changes rapidly, and the current smart costs of e smart phone is a unique item in that not introduce the new smart phone, sales will be 95,000 units and is preprogrammed and 65,000 units for the next two years, respectively. The price phone is $380 per unit, with variable $145 each and fixed costs of $4.3 million per year. features in comparison with newer models. If Conch Republic does introduce the new smart phone, sales lic spent $750,000 to develop a prototype for a of the existing smart phone will fall by 30,000 units per year, new smart phone that has all the features of the existing smart and the price of the existing units will have to be lowered to t adds new features such as WiFi tethering. The com $210 each. Net working capital for the smart phones will be pany has spent a further $200, determine the expected sales figures for the new smart phone. 000 for a marketing study to 20 percent of sales and will occur with the timing of the cash flows for the year; for example, there is no initial outlay for onch Republic can manufacture the new smart phones for $215 each in variable costs. Fixed costs for the operation are estimated to run $6.1 million per year. The estimated sales tax rate and a required return of 12 percent. volume is 155,000, 165,000, 125.000,95.000, and 75,000 per year for the next five years, respectively. The unit price of the following questions. new smart phone will be S520. The necessary equipment can NWC, but changes in NWC will first occur in Year 1 with the first year's sales. Conch Republic has a 35 percent corporate Shelley has asked Jay to prepare a report that answers the erMdalc t s beleved the value of the. Wha is he payback periodof the projert seven- equipment in five years will be $6.1 million. As previously stated, Conch Republic currently manufac- tures a smart phone. Production of the existing model is ex- pected to be terminated in two years. If Conch Republic does 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