24 Jul HOW SENSITIVE IS THE NPV TO CHANGES IN THE QUANTITY SOLD?
Conch Republic Electronics is a midsized el Show more Please answer with Excel Formulas or answer explanation: Conch Republic Electronics is a midsized electronics manufacturer located in Key West Florida. The company president is Shelly Couts who inherited the company. The company originally repaired radios and other household appliances when it was founded over 70 years ago. Over the years the company has expanded and it is now a reputable manufacturer of various specialty electronic items. Jay McCanless a recent MBA graduate had been hired by the company in its finance department. One of the major revenue-producing items manufactured by Conch Republic is a smart phone. Conch Republic currently has one smart phone model on the market and sales have been excellent. The smart phone is a unique item in that it comes in a variety of tropical colors and is preprogrammed to play Jimmy Buffett music. However as with any electronic item technology changes rapidly and the current smart phone has limited features in comparison with newer models. Conch Republic spent $750000 to develop a prototype for a new smart phone that has all the features of the existing one but adds new features such as wifi tethering. The company has spent a further $200000 for a marketing study to determine the expected sales figures for the new smart phone. Conch Republic can manufacture the new smart phone for $205 each in variable costs. Fixed costs for the operation are estimated to run $5.1 million per year. The estimated sales volume is 64000 106000 87000 78000 and 54000 per year for the next five years respectively. The unit price of the new smart phone will be $485. The necessary equipment can be purchased for $34.5 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $5.5 million. Net working capital for the smart phones 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 NWC). Changes in NWC will thus first occur in Year 1 with the first years sales. Conch Republic has a 35 percent corporate tax rate and a required rate of return of 12 percent. Shelly has asked Jay to prepare a report that answers the following questions: Questions 1. What is the payback period of the project? 2. What is the profitability index of the project? 3. What is the IRR of the project? 4. What is the NPV of the project? 5. How sensitive is the NPV to changes in the price of the new smart phone? (what is PI IRR NPV & what is change in NPV?) 6. How sensitive is the NPV to changes in the quantity sold? (what is PI IRR NPV & what is change in NPV?) 7. Should Conch Republic produce the new smart phone? 8. Suppose Conch Republic loses sales on other models because of the introduction of the new model. How would this affect your analysis? Show less
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.