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349 Chapter 10 Making Cepital Investment Decisions Conch Republic Electronics, Part 1 Beoublic: Electronies is a midsired electronics manu be purchased for $43.5 million and will be depreciated on a cazed in Key West, Florida. The company president seven-year MACRS schedule. It is believed the value of the r70 years ago, the company originally repaired As previously stated, Conch Republic currenily manufac- sed into mansifacturing and is now a repatable pected to be terminated in two years. If Conch Republie does ly Cous, who inherited the company. When it was equipment in five years will be S6.5 million. dios and other household appliances. Over the years, the tures a smartphone. Production of the existing model is ex emiacturcr of various electronic items. Jay McCanless, a re. not introduce the new smartphone, sales will be 95,000 units MBA grabuate, has been hired by the companys finance and 65,000 units for the next two years, respectively. The price of the existing smartphone is $385 per unit, with variable costs One of the major revenue-producing items manufactured of$145 each and fixed costs of $4.3 million per year. IrConch Coch Republic is a smartphone. Conch Republie currently Republic does introduce the new smartphone, sales of the ex hos une smartphone model on the market, and sales have been isting smartphone will fall by 30,000 units per year, and the scelent. The smartphone is a unique item in that it comes in a price of the existing units will have to be lowered to $215 each. rit ol tropical colors and is preprogrammed to play Jimmy Net working capital for the smartphones will be 20 percent music However, as with any electronic item, technol- of sales and will occur with the timing of the cash flows for e dunges rapidly, and the current smartphone has limited the year; for example, there is no initial outlay for NWC, but zues in comparison with mewer models. Conch Republic changes in NWC will first occur in Year I with the first years a 5750000 to develop a prototype for a new smartphone sales. Conch Republic has a 21 percent corporate tax rale and hs all the featares of the existing smartphone but adds a required return of 12 percent ns btures sach as WiFi sethering. The company has Uharber $2300,000 for a marketing stady to determine the ex following questions. peseod sales figares for the new smartphone spent Shelley has asked Jay to prepare a report that answers the nsh Republic can manufacture the new smartphones for QUESTIONS a varisble costs. ixed costs for the operation are 1. What is the payback period of the project? lm s 155,000 165,000. 125,000, 2. what is the profitability idex of the project? 3. , 95,000, and 75,000) per years, respectively. The unit price of the eine vill be $515. The necessary eqpuipment can What is the IRR of the project? . What is the NPY of the project? 349 Chapter 10 Making Cepital Investment Decisions Conch Republic Electronics, Part 1 Beoublic: Electronies is a midsired electronics manu be purchased for $43.5 million and will be depreciated on a cazed in Key West, Florida. The company president seven-year MACRS schedule. It is believed the value of the r70 years ago, the company originally repaired As previously stated, Conch Republic currenily manufac- sed into mansifacturing and is now a repatable pected to be terminated in two years. If Conch Republie does ly Cous, who inherited the company. When it was equipment in five years will be S6.5 million. dios and other household appliances. Over the years, the tures a smartphone. Production of the existing model is ex emiacturcr of various electronic items. Jay McCanless, a re. not introduce the new smartphone, sales will be 95,000 units MBA grabuate, has been hired by the companys finance and 65,000 units for the next two years, respectively. The price of the existing smartphone is $385 per unit, with variable costs One of the major revenue-producing items manufactured of$145 each and fixed costs of $4.3 million per year. IrConch Coch Republic is a smartphone. Conch Republie currently Republic does introduce the new smartphone, sales of the ex hos une smartphone model on the market, and sales have been isting smartphone will fall by 30,000 units per year, and the scelent. The smartphone is a unique item in that it comes in a price of the existing units will have to be lowered to $215 each. rit ol tropical colors and is preprogrammed to play Jimmy Net working capital for the smartphones will be 20 percent music However, as with any electronic item, technol- of sales and will occur with the timing of the cash flows for e dunges rapidly, and the current smartphone has limited the year; for example, there is no initial outlay for NWC, but zues in comparison with mewer models. Conch Republic changes in NWC will first occur in Year I with the first years a 5750000 to develop a prototype for a new smartphone sales. Conch Republic has a 21 percent corporate tax rale and hs all the featares of the existing smartphone but adds a required return of 12 percent ns btures sach as WiFi sethering. The company has Uharber $2300,000 for a marketing stady to determine the ex following questions. peseod sales figares for the new smartphone spent Shelley has asked Jay to prepare a report that answers the nsh Republic can manufacture the new smartphones for QUESTIONS a varisble costs. ixed costs for the operation are 1. What is the payback period of the project? lm s 155,000 165,000. 125,000, 2. what is the profitability idex of the project? 3. , 95,000, and 75,000) per years, respectively. The unit price of the eine vill be $515. The necessary eqpuipment can What is the IRR of the project? . What is the NPY of the project