Conch Republic Electronics Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelley Couts, who inherited the company. When it was founded over 70 years ago, the company originally repaired radios and other household appliances. Over the years, the company expanded into manufacturing and is now a reputable manufacturer of various electronic items. Jay McCanless, a recent MBA graduate, has been hired by the company's finance department One of the major revenue producing items manufactured by Conch Republic is a smart phone. Conch Republic currently has one smart phone model on the market, and sales have been excellent. The smart phone is a unique item in that it comes in a variety of tropical colors and is preprogrammed to play Jimmy Buffett music. However, as with any clectronic item, technology changes rapidly, and the current smart phone has limited features in comparison with newer models. Conch Republic spent SI 500,000 to develop a prototype for a new smart phone that has all the features of the existing smart phone but adds new features such as WiFi tethering. The company has spent a further $500,000 for a marketing study to determine the expected sales figures for the new smartphone Conch Republic can manufacture the new smart phones for $250 each in variable costs. Fixed costs for the operation are estimated to run $3.6 million per year. The estimated sales volume is 70.000, 90.000, 120,000, 110,000 and 80,000 per year for the next five years, respectively. The unit price of the new smart phone will be $480. The necessary equipment can be purchased for SSmillion and will be depreciated on a seven- years MACRS schedule. It is believed the value of the equipment in five years will be 55 million As previously stated. Conch Republic currently manufactures a smart phone. Production of the existing model is expected to be terminated in two years. If Conch Republic dose not introduce the new smart phone, sales will be 80.000 units and 60,000 units for the next two years, respectively. The price of the existing smart phone is $310 per unit, with variable costs of $125 cach and fixed costs of $1,800,000 per year. If Conch Republic dose introduce the new smart phone, sales of the existing smart phone will fall by 15.000 units per year, and the price of the existing units will have to be lowered to $275 cach. Net working capital for the smart phones will be 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 NWC, but changes in NWC will first occur in year I with the first year's sales. Conch Republic has a 35 percent corporate tax rate and a 12 percent required return. Shelley has asked Jay to prepare a memo answering the following questions Questions: 1. Is the project attractive to be chosen by the company? Use sufficient tools for your recommendation? Define the criteria that we should use to make the decision? Performance area 1) 2. What are some more sophisticated measures that you can use to decide on the feasibility of this project? Show clearly using excel files your detailed Procedures. Performance area 2) Note: All calculation for cash flows and evaluation criteria should be done by Excel. The excel file should be submitted with your report