MINICASE

Conch Republic Electronics, Part $2$

Shelley Couts, the owner of Conch Republic Electronics, has received the capital budgeting analysis from Jay

McCanless for the new smartphone the company is considering. Shelley is pleased with the results, but she still

has concerns about the new smartphone. Conch Republic has used a small market research firm for the past $20$

years, but recently the founder of that firm has retired. Because of this, Shelley is not convinced the sales

projections presented by the market research firm are entirely accurate. Additionally, because of rapid changes

in technology, she is concerned that a competitor may enter the market. This would likely force Conch Republic

to lower the sales price of its new smartphone. For these reasons, she has asked Jay to analyze how changes in

the price of the new smartphone and changes in the quantity sold will affect the NPV of the project.

Shelley has asked Jay to prepare a memo answering the following questions.

QUESTIONS

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

How sensitive is the NPV to changes in the quantity sold of the new smartpho

ne$?$

MINICASE

Conch Republic Electronics, Part $2$

Shelley Couts, the owner of Conch Republic Electronics, has received the capital budgeting analysis from Jay

McCanless for the new smartphone the company is considering. Shelley is pleased with the results, but she still

has concerns about the new smartphone. Conch Republic has used a small market research firm for the past $20$

years, but recently the founder of that firm has retired. Because of this, Shelley is not convinced the sales

projections presented by the market research firm are entirely accurate. Additionally, because of rapid changes

in technology, she is concerned that a competitor may enter the market. This would likely force Conch Republic

to lower the sales price of its new smartphone. For these reasons, she has asked Jay to analyze how changes in

the price of the new smartphone and changes in the quantity sold will affect the NPV of the project.

Shelley has asked Jay to prepare a memo answering the following questions.

QUESTIONS

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

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