Requirement 3 (55 points)

Nokia Inc. has one smart phone model on the market, and sales have been excellent. The product is a unique item in the market that it comes in a variety of tropical colors. However, the technology changes rapidly, and the current smart phone has limited features in comparison with newer models. The company is planning for a new smartphone, which will include all the existing features and WiFi tethering in addition.

Nokia Inc. can manufacture the new smart phones for $365 each in variable costs. Fixed costs for the operation are estimated to run $6.9 million per year. The estimated sales volume is 180,000;

190,000; 150,000; 125,000; and 100,000 per year for the next five years, respectively. The unit price of the new smart phone will be $625. The necessary equipment can be purchased for $60.0 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $6.8 million.

The effective tax rate for the company is 35%. The project requires no initial NWC investment, and it requires NWC balance equal to 15% of sales with the timing of the cash flows for the year.

For example, there is no initial outlay for NWC, but changes in NWC will first occur in Yearl with the first year's sales. The required return for the project is 20%.

Prepare a report in the given excel sheet that answers the following questions.

1. What is the payback period (PBP) of the project? Based on your analysis of PBP, should the company accept the smart phone project if the required payback period is 3 years? Use "if" formula to construct "Accept" or "Reject" decision. (10 points)
2. What is the IRR of the project? Based on your analysis of IRR, should the company accept the project? Use "if" formula to construct "Accept" or "Reject" decision. (10 points)
3. What is the NPV of the project? Based on your analysis of NPV, should the company accept the project? Use "if" formula to construct "Accept" or "Reiect" decision. (10 points)

Project 2

1. What is the Profitability Index (PI) of the project? Based on your analysis of PI, should the company accept the project? Use "if" formula to construct "Accept" or "Reject" decision. (5 points)
2. At what price would Nokia Inc. be indifferent to accepting the project? Use "if formula to construct "Accept" or "Reject" decision. (10 points)
3. Draw the NPV profile for the Project. (10 points)

please answer using the formats in the excel sheets

Requirement 3 ( 55 points) Nokia Ine. has one smart phone model on the market, and sales have been excellent. The product is a unique item in the market that it comes in a varicty of tropical colors. However, the technology changes rapidly, and the current smart phone has limited features in comparison with newer models. The company is planning for a new smartiphone, whict will include all the existing features and WiFi tethering ia addition. Nokia Inc. can manafacture the new smart phones for $365 each in variable costs. Fixed costs for the operation are estimated to run $6.9 million per year. The estimated sales volume is 180,000 ; 190,000;150,000;125,000; and 100,000 per year for the next five years, respectively. The unit price of the new smart phone will be $625. The necessary equipment can be purchased for $60.0 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be 56.8 million. The effective tax race for the company is 35%. The project requires bo initial NWC investment, and it requires NWC balance equal to 15% of sales with the timing of the cash flows for the year. For example, there is no initial outlay for NWC, but changes in NWC will first occur in Year1 with the first year's sales. The required return for the project is 20%. Prepare a report in the given excel sheet that answers the following questions. 1. What is the payback period (PBP) of the project? Based on your analysis of PBP, should the company accept the smart phone project if the required payback period is 3 years? Use "if" formala to construct "Accept" or "Reject" decisioa. (10 points) 2. What is the IRR of the project? Based on your analysis of IRR, should the company accept the project? Use "if" formula to construct "Accept" or "Reject" decision. (10 points) 3. What is the NPV of the project? Based on your analysis of NPV, should the company accept the project? Use "if" formula to construct "Accept" or "Reject" decision. (10 points) Preject 2 4. What is the Profitability Index (PI) of the project? Based on your analysis of PI, should the company accept the project? Use "if" formula to constract "Accept" of "Reject" decision. (5 points) 5. At what price would Nokia lne. be indifferent to aceepting the project? Use "if" formula to construct "Accept" or "Reject" decision. (10 points) 6. Draw the NPV profile for the Project. (10 points) Equipment Cost Market value of salvage Units Price Variable cost (per unit) Fixed wits (per year) Tax rate NWC (\% of sales) Hequired return Required Paybadk Peried (years) MACRS Sehedule 3 -year \begin{tabular}{cccccccc} Year & YearZ & Year.3 & Year 4 & Year.5 & Year.6 & Year 7 & Year8 \\ \hline 33.33% & 44.45% & 14.81% & 7.41% & & & & \\ 20.00% & 32.00% & 19.20% & 11.52% & 11.52% & 5.76% & & \\ 14.29% & 24.49% & 17.49% & 12.49% & 8.93% & 8.92% & 8.93% & 4.46% \end{tabular} 12 Net Working Capital 14 Year 15 NWC \begin{tabular}{cccccc} Year 0 & Year 1 & Year 2 & Year 3 & Year 4 & Year 5 \\ \hline \end{tabular} 16 Changes in NWC 17 Recovery of NWCat the very lastyear Tax=( Market value of salvage- book value of salvage) +tax Cash faws frem asset o Renember 1 asd the tecevery of NWC add the alter tar salvimen vitue Change is BwC Recevery of NWC Tocal rash flaw Question 1 \begin{tabular}{ll|l|} \hline 35 & Payback Period & \\ \hline 36 & Decision? & \\ \hline 37 & & \\ 38 & Question2 & \\ \hline 39 & NPV & \\ \hline 40 & Decision? & \\ \hline \end{tabular} Question 3 Question 5 51 Indiffirent Sales Price 52 Question6