Question
please show excel formulas Stankus-Wolf Electronics is a midsized electronics manufacturer located in Tampa, Florida. The company president is Alison Lyons, who inherited the company.
please show excel formulas
Stankus-Wolf Electronics is a midsized electronics manufacturer located in Tampa, Florida. The company president is Alison Lyons, who inherited the company. The company originally repaired radios and other household appliances when it was founded more than 70 years ago. Over the years, the company has expanded, and it is now a reputable manufacturer of various specialty electronic items. Derek Rigsby, a recent MBA graduate, has been hired by the company in its finance department. One of the major revenue-producing items manufactured by Stankus-Wolf Electronics is a smartphone. Stankus-Wolf Electronics 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 vibrant colors and is preprogrammed to play Taylor Swift music. However, as with any electronic item, technology changes rapidly, and the current smartphone has limited features in comparison with newer models. Stankus-Wolf Electronics spent $2.2 million to develop a prototype for a new smartphone that has all the features of the existing one but adds new features such as Wifi tethering. The company also spent $475,000 for a marketing study to determine the expected sales figures for the new smartphone. Stankus-Wolf Electronics can manufacture the new smartphone for $425 each in variable costs. Fixed costs for the operation are estimated to run $8.5 million per year. The estimated sales volumes are 68,000, 108,000, 89,000, 82,000, and 59,000 per year for each of the next five years, respectively. The unit price of the new smartphone will be $950. The necessary equipment can be purchased for $52.5 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $6.5 million. Net working capital ("NWC") for the smartphone will be 20 percent of sales and will occur with the timing of the cash flows for the year (i.e. there is no initial outlay for the NWC). Changes in NWC thus will occur in Year 1 with the first year's sales. Stankus-Wolf Electronics has a 23 percent corporate tax rate and a required return of 12 percent.
6. How sensitive is the NPV to changes in the quantity sold? Assume an increase of 100 units per year for your analysis. \begin{tabular}{|c|c|c|c|c|c|} \hline & Year 1 & Year2 & Year3 & Year4 & Year5 \\ \hline \multicolumn{6}{|l|}{ Sales } \\ \hline \multicolumn{6}{|l|}{ VC } \\ \hline \multicolumn{6}{|l|}{ Fixed costs } \\ \hline \multicolumn{6}{|l|}{ Depreciation } \\ \hline \multicolumn{6}{|l|}{ EBT } \\ \hline \multicolumn{6}{|l|}{ Tax } \\ \hline \multicolumn{6}{|l|}{NI} \\ \hline \multicolumn{6}{|l|}{ + Depreciation } \\ \hline \multicolumn{6}{|l|}{ Operating Cash Flow } \\ \hline \multicolumn{6}{|l|}{ Beginning NWC } \\ \hline \multicolumn{6}{|l|}{ Ending NWC } \\ \hline \multicolumn{6}{|l|}{ NWC Cash Flow } \\ \hline \multicolumn{6}{|l|}{ Net CF for sale of equipment } \\ \hline \multicolumn{6}{|l|}{ Cash Flows for Project: } \\ \hline \multicolumn{6}{|l|}{ Time } \\ \hline 0 & & & & & \\ \hline 1 & & & & & \\ \hline 2 & & & & & \\ \hline 3 & & & & & \\ \hline 4 & & & & & \\ \hline 5 & & & & & \\ \hline NPV with additional 100 units/yr & & & & & \\ \hline Sensitivity of changes in units: & & & & & \\ \hline \end{tabular}Step by Step Solution
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