Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelley Couts, who inherited the company. Over the years, the company expanded into manufacturing and is now a reputable manufacturer of various electronic items. 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. Conch republic spent $750,000 to develop a prototype for a new smart phone that has all the features of their existing smart phones. The company has spent a further $200,000 for a marketing study to determine the expected sales figures for the new smart phone. Conch republic can manufacture the new smart phones for $220 each in variable costs. Fixed costs for the operation are estimated to run $6.4 million per year. The estimated sales 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 new smart phone will be $535. The necessary equipment can be purchased for $43.5 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $6.5 million. As previously stated, Conch Republic currently manufactures a smartphone. Production of the existing model is expected to be terminated in two years. If Conch does not introduce a new smartphone, sales will be $95,000 units and 65,000 units for the next two years respectively. The price of the existing smartphone is $385 per unit, with variable costs of $145 each and fixed costs of $4.3 million per year. If Conch does introduce the new smartphone, sales of the existing smartphone will fall by 30,000 units per year, and the price of the existing units will have to be lowered to $215 each. Net working capital for the smartphones 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 occur in Year 1 with the first year's sales. Conch Republic has a 21 percent corporate tax rate and a required return of 12 percent. 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?

I have gotten the following answers,

Payback Period: 2.4 years

Profitability Index: 1.8410

IRR: 36.013%

NPV: $36,584,768

I now need to answer these questions,

1) How sensitive is the NPV to changes in the price of the new smartphone?

2)How sensitive is the NPV to changes in the quantity sold of the new smartphone?