Part 3: Can We Upgrade? 1t's now 2020, and El Cap Climbing Compenv (ECCC) hes coutioued to grow One of ECCC's major roveone-poodncing pooducts is a spring-joaded excellen. The cams ane Lighter and peciorm beuer than their competivors'. Ifonever, as with ary high petfuccuace inent technology changes rapidly, and the cans are nuw fallitg beaind lise cutapection HXXil: spent sow, uDo in dexelop a protonge for a new line of cams that has all the fonrumes of the extstingesms bur are made form an covn lighter and stronger iv?a-It alumimum allog. Ihe comparw has ppeat a further $150,000 for a marketing study to denermine the crepctnd sales figurrs for the cam line. ECCC can manufachure set of the netr cams far an averape of S140 each th variabie costs. Ftxed costs for the operation are estimared to run an additional \$2.1 million per year if the nes project is undertaken. The estimated sales volume is 75,000,85,004,80,000,30, sc0, and so, 000 per pear far the next five jears, respectively. The umir price of the nass cem set will be $240. The necessary equipment can be purchased for $10.5 mitlion and will be depreciated on a seven-fear MiACRS schedule. It's believed the value of the equipment in five years ril be Sil maltion. If ECCC doesu't incroduce the new Ine of cans, sales will be 45,000 units and 25,000 units for the next wro years, tespectirely. The price of the cam set is $150, with variable costs of $95 eact, and ixed cosis o? $1.5 million peryear. If ECCC does introduce the new cans, sales o? the existing product will tall by 10,000 units per year, and the price of the exsing secs should be lowered to $120 each. Net working capltal for the cans will be 23 perceut of sales and will occur with the tizaing ot the cast flose tor the year; for example, there's no initial ouday for NDTC, but etanges in XWC will oceur in Year 1 wich the fird year's sales. ECCC has a 30 percecul corporate tax rate and a seyuired cetura of 10 percenL (Nole: You cast cosale the sulutioss in che sarue Excel spresdshet chnose to do thle instesid of ercatlng, them in a Word dommont.) cuatains information waswer the foliuwing yuestiuns: 1. What's the payhack priod of the proserr? 2. What's the ptofisbilite inder of the prolect? 3. What's the I8k of the project? 4. What's the NPr of the proser? 5. Should Leab accept the projecr? 6. If Leah needs to adfust the pree of the producr, what's the iowest Leab could make the price of the nesc can set and still have a positive NPW project (keeping al otier assumptions the same)
