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Conch Republic is a midsized electronics manufacturer. They have one smart phone model on the market. They spent $750000 to develop a prototype for a new smart phone. They spent a further $200000 for a marketing study. They can manufacture the new phone for $205 each in variable costs. Fixed costs for the operation are estimated to run $5.1m per year. The estimated sales volume is 64000 106000 87000 78000 and 54000 per year for the next 5 years respectively. The unit price for the new phone will be $485. The necessary equipment will be $34.5m and will be depreciated on a 7-year straight line schedule. The value of the equipment in 5 years will be $5.5m. Net working capital for the phones will be 20% 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 year’s sales. They have a 35% corporate tax rate and a required return of 12%.
I need the spreadsheet attached to be completed and the following questions answered:
1.What is thepayback 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?
6.How sensitive is the NPV to changes in the quantity sold?
7.Should Conc hRepublic produce the new smart phone?
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