Reference no: EM131347090
Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelley Couts, who inherited the company. When it was founded over 70 years ago, the company originally repaired radios and other household appliances. Over the years, the company expanded into manufacturing and is now a reputable manufacturer of various electronic items. Jay McCanless, a recent MBA graduate, has been hired by the company’s 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 $750,000 to develop a prototype for a new smart phone that has all the features of theexisting smart phone but adds new features such as WiFi tethering. The company has spent a further $200,000 for a marketing study to determine the expected sales figures forthe new smart phone. Conch Republic can manufacture the new smart phones for $185 each in variable costs. Fixed costs for the operation are estimated to run $5.3 million per year. The estimated sales volume is 74,000, 95,000, 125,000, 105,000, and 80,000 per year for the next five years, respectively. The unit price of the new smart phone will be $480. The necessary equipment can be purchased for $38.5 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $5.4 million. As previously stated, Conch Republic currently manufactures a smart phone. Production of the existing model is expected to be terminated in two years. If Conch Republic does not introduce the new smart phone, sales will be 80,000 units and 60,000 units for the next two years, respectively. The price of the existing smart phone is $310 per unit, with variable costs of $125 each and fixed costs of $1,800,000 per year. If Conch Republic does introduce the new smart phone, sales of the existing smart phone will fall by 15,000 units per year, and the price of the existing units will have to be lowered to $275 each. 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; for example, there is no initial outlay for NWC, but changes in NWC will fi rst occur in Year 1 with the first year’s sales. Conch Republic has a 35 percent corporate tax rate and a 12 percent required return. Shelley 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?
How important is the documentation of database environment
: How important is the documentation of the database environment? Moreover, how do you think the advent of cloud computing has affected electronic data interchange (EDI)? Are you in favor of outsourcing the auditing activity, and why or why not?
|
Design a burner for a furnace
: Design a burner for a furnace that will produce 2:00 × 106 Btu/h at 1500. °F. Choose the fuel, flow rates, air/fuel ratio, burner material, burner geometry, flow controls, and the like.
|
Compute the lhv of gaseous octane
: Develop a spreadsheet to compute the LHV of gaseous octane and use it to find the adiabatic flame temperature for (a) 100.% and (b) 200.% theoretical air.
|
A make-whole call provision on bond provides
: A "make-whole" call provision on a bond provides for: If the nominal rate of return on a bond is 8.59 percent and the real rate is 3.87 percent, what is the rate of inflation? A market participant who buys and sells securities from inventory is calle..
|
What is the profitability index of the project
: Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelley Couts, who inherited the company. When it was founded over 70 years ago, the company originally repaired radios and other..
|
Fully depreciated on straight-line basis over seven years
: Sanders Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $289,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the seven years..
|
Two different conveyor belt systems
: BOE Manufacturing is trying to decide between two different conveyor belt systems. System A costs $216,000, has a four-year life, and requires $69,000 in pretax annual operating costs. System B costs $306,000, has a six-year life, and requires $63,00..
|
Market values of capital-weighted average cost of capital
: (WACC) ABC, Inc has the following market values of capital. ABC has a tax rate of 15%. What is ABC'S weighted average cost of capital ?
|
What is marys effective annual rate
: Mary purchased 100 shares of Sweet Pea Co. stock at a price of $42.24 six months ago. She sold all stocks today for $42.91. During that period the stock paid dividends of $1.14 per share. What is Mary’s effective annual rate?
|