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I have a simailar problem so can answer for me a problem in a exel sheet because I need to sumbmited today Conch Republic Electronics
I have a simailar problem so can answer for me a problem in a exel sheet because I need to sumbmited today Conch Republic Electronics
Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company
president is Shelly Couts, who inherited the company. The company originally repaired radios and other household
appliances when it was founded more than years ago. Over the years, the company has expanded, and it is now a
reputable manufacturer of various specialty electronic items. Jay McCanless, a recent MBA graduate, has been hired
by the company in its finance department.
One of the major revenueproducing items manufactured by Conch Republic is a smartphone. Conch Republic
currently has one smartphone model on the market, and sales have been excellent. The smartphone 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
electronic item, technology changes rapidly, and the current smartphone has limited features in comparison with
newer models. Conch Republic spent $ million to develop a prototype for a new smartphone that has all the
features of the existing one but adds new features such as WiFl tethering. The company has spent a further $
for a marketing study to determine the expected sales figures for the new smartphone.
Conch Republic can manufacture the new smartphone for $ each in variable costs. Fixed costs for the operation
are estimated to run $ million per year. The estimated sales volumes are and
per year for each of the next five years, respectively. The unit price of the new smartphone will be $ The
necessary equipment can be purchased for $ million and will be depreciated on a sevenyear MACRS schedule. It
is believed the value of the equipment in five years will be $ million.
Net working capital for the smartphones will be percent of sales and will occur with the timing of the cash flows for
the year ie there is no initial outlay for NWC Changes in NWC thus will occur first in Year with the first year's sales.
Conch Republic has a percent corporate tax rate and a required return of percent.
Shelly has asked Jay to prepare a report that answers the following questions:.
What is the payback period of the project?
What is the profitability index of the project?
What is the IRR of the project?
What is the NPV of the project?
How sensitive is the NPV to changes in the price of the new smart phone?
How sensitive is the NPV to changes in the quantity sold?
Should Conch Republic produce the new smart phone?
Suppose Conch Republic loses sales on other models because of the introduction of the new model. How would this affect your analysis?
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