Conch Electronics VC $215 Ans

  

Given Data:

  

Equipment

$32,500,000

 

Salvage value

$3,500,000

 

R&D

$750,000

 

Marketing   study

$200,000

   

Year-1

Year-2

Year-3

Year-4

Year-5

 

Sales(units)

65,000

82,000

108,000

94,000

57,000

 

Depreciation   rate

14.29%

24.49%

17.49%

12.49%

8.93%

(Depreciation rate is as per MACR applicable percentage for 7 years)

  

Price

$500 

 

VC

$215 

 

FC

$4,300,000 

 

Tax rate

35%

 

NWC   percentage

20%

 

Required   return

12%

Based on this data, Cash Flow can be calculated as:

  

Year-1

Year-2

Year-3

Year-4

Year-5

 

Sales

32500000

41000000

54000000

47000000

28500000

 

VC

13975000

17630000

23220000

20210000

12255000

 

Fixed costs

4300000

4300000

4300000

4300000

4300000

 

Depreciation

4644250

7959250

5684250

4059250

2902250

 

EBT

9580750

11110750

20795750

18430750

9042750

 

Tax

3353263

3888763

7278513

6450763

3164963

 

Net Income

6227488

7221988

13517238

11979988

5877788

 

Add   Depreciation

4644250

7959250

5684250

4059250

2902250

 

Operating CF

10871738

15181238

19201488

16039238

8780038

 

 

NWC

 

Beginning

0

6500000

8200000

10800000

9400000

 

Ending

6500000

8200000

10800000

9400000

0

 

NWC CF

-6500000

-1700000

-2600000

1400000

9400000

 

 

Net CF

4371738

13481238

16601488

17439238

18180038

What is the payback period on the project?

  

Create a net present value chart in your spreadsheet.

  

What is the IRR of the project?

  

What is the NPV of the project?

 How sensitive is the NPV to changes in the price of the new PDA?
  

How sensitive is the NPV to chances in the quantity sold?

  

Should Conch Republic produce the new PDA?

  

Suppose Conch Republic loses sales on other models because of the introduction of the new model. How would this affect your analysis?