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Problem 5: Suppose Orange Inc. is considering a new product launch, CEO asks for your help: The new project is to produce OPhone 6Super (just

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Problem 5: Suppose Orange Inc. is considering a new product launch, CEO asks for your help: The new project is to produce OPhone 6Super (just a little more expensive than current version, other than that, you can't tell the difference). It will cost $72,000 to purchase new equipment, which has a three-year life and no salvage value; depreciation is straight-line to zero. The OPhone price will be sold at $500 each, no discount at any time, variable cost per unit is $200, fixed costs would be $5,000 per year, tax rate is 35%. Annual market consumption of mobile phones is 300, Orange and Singsong split the market, with 50% market share each. In addition, Orange is filing a lawsuit against Singsong, if Orange wins a patent verdict against Singsong, Orange would increase its market share up to 90%, otherwise, Orange's Market share would drop to 10%. Required rate of return is 15%. Based on the information given, evaluate the project under normal, best and worst scenarios. Construct pro forma income statements and calculate future cash flows, NPV and IRR (30pt)

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