349 Chapter 10 MINICASE conch Republic Electronics, Part 1 Electronics is a midsized electronics manu- kxaled tn k:' West. Florida company president Coot', who mherited the company When it was 70 Fars ago. company originally repaired other household appliarwev Over years. the into manufaturing and is now reputable various el&lronic items. Jay McCanIess. a re. MBA graduate. has hired by thc company's finance Ox of hc revenue-producing items manufactured snvarlphone Conch Republic cunemly model on the market. and ha\e been Tt*smarlllhonc i' unique item in it comes in a and ie preprogrammed Jimmy However. as with electronic item. technol rapidly thc current smartphone has limited wilh Republic leatures oi the existing svnarlphorn hul adds r. WiFi Lethering. Thc company has spent marketing quay 'O cs- uk. fru new smallphone Republic manufacture Lhe new smartphones for Elsed costs 'Or thc otxration are year and per unit of the ill equipment Cav-:tai r.wstment purvhmd for SAB S million and will deprecialcd on a seven-year MACRS schedule: is bchcvcd the value Of thc five years AS previously stared. Conch Republic currently nunufac tutes a smartphone of thc existing modcl is pected to be terminated in years. If Conch Republic not introduce new smartphone. sales will be units and unils for thc next two years. resJvcli'.eIy. pr'CV or the existing smartphone is S.AS5 unit. With vanahle costs of each and of S4_3 million 'car. (C Conch Republic introduce lhe smanphone, sales of the cx isling smanphone will by per year. and 'he price costing units will be lowered to S21 5 each. working capital for smartphone' will be 20 Jkrcent 01 and will With the liming Of the there is no initial for NWC. hut changQs in N WC will firs* occur in Year I with first year's sales. Conch Republic has 21 perccm corporate lax rate and a required return Of 12 percent Shelley has asked Jay to prepare s report answers the questions. QUESTIONS What is of thc 2. What is Of project'? 3. IRR of 4. What is the NPV