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.%0D%0A%0D%0AShelley has asked Jay to prepare a memo answering the following questions.%0D%0A%0D%0AQUESTIONS%0D%0A%0D%0AHow sensitive is the NPV to changes in the price of the new smartphone?%0D%0AHow sensitive is the NPV to changes in the quantity sold of the new smartphone?

Use template plase

	Sales	Year 1	Year 2	Year 3	Year 4	Year 5
	New
	Lost sales
	Lost revenue
	Net sales
	VC
	New
	Lost sales

	Sales
	VC
	Fixed costs
	Depreciation
	EBT
	Tax
	NI
	+ Depreciation
	OCF

	NWC
	Beg
	End
	NWC CF
	Net CF

BV of equipment =

	Time	Cash Flow
	0
	1
	2
	3
	4
	5

The NPV

And the sensitivity of changes in the NPV to changes in the price is:

NPV/P =

2.

	Sales	Year 1	Year 2	Year 3	Year 4	Year 5
	New
	Lost sales
	Lost revenue
	Net sales
	VC
	New
	Lost sales
	Sales
	VC
	Fixed costs
	Depreciation
	EBT
	Tax
	NI
	+ Depreciation
	OCF
	NWC
	Beg
	End
	NWC CF
	Net CF

BV of equipment =

CF on sale of equipment =

So, the cash flows of the project under this quantity assumption are:

Time
0
1
2
3
4
5

The NPV under this assumption is:

NPV =

NPV/Q =