Loading...

Messages

Proposals

Stuck in your homework and missing deadline? Get urgent help in $10/Page with 24 hours deadline

Get Urgent Writing Help In Your Essays, Assignments, Homeworks, Dissertation, Thesis Or Coursework & Achieve A+ Grades.

Privacy Guaranteed - 100% Plagiarism Free Writing - Free Turnitin Report - Professional And Experienced Writers - 24/7 Online Support

Conch republic electronics mini case

25/03/2021 Client: saad24vbs Deadline: 2 Day

CHAPTER 9 CONCH REPUBLIC ELECTRONICS This is an in-depth capital budgeting problem. The initial cash outlay at Time 0 is simply the cost of

the new equipment, $34,500,000. The sales each year are simply the quantity sold times the price, and the variable costs are the quantity sold times the variable cost per unit. The pro forma income statement and cash flow will be:

Sales Year 1 Year 2 Year 3 Year 4 Year 5 Sales $31,040,000 $51,410,000 $42,195,000 $37,830,000 $26,190,000 VC 13,120,000 21,730,000 17,835,000 15,990,000 11,070,000 Fixed costs 5,100,000 5,100,000 5,100,000 5,100,000 5,100,000 Depreciation 4,930,050 8,449,050 6,034,050 4,309,050 3,080,850 EBT $7,889,950 $16,130,950 $13,225,950 $12,430,950 $6,939,150 Tax 2,761,483 5,645,833 4,629,083 4,350,833 2,428,703 NI $5,128,468 $10,485,118 $8,596,868 $8,080,118 $4,510,448 + Depreciation 4,930,050 8,449,050 6,034,050 4,309,050 3,080,850 OCF $10,058,518 $18,934,168 $14,630,918 $12,389,168 $7,591,298 NWC Beg $0 $6,208,000 $10,282,000 $8,439,000 $7,566,000 End 6,208,000 10,282,000 8,439,000 7,566,000 0 NWC CF –$6,208,000 –$4,074,000 $1,843,000 $873,000 $7,566,000 Net CF $3,850,518 $14,860,168 $16,473,918 $13,262,168 $15,157,298

BV of equipment = $34,500,000 – 4,930,050 – 8,449,050 – 6,034,050 – 4,309,050 – 3,080,850 BV of equipment = $7,696,950 Taxes on sale of equipment = (BV – MV)(TC) = ($7,696,950 – 5,500,000)(.35) = $768,933 CF on sale of equipment = $5,500,000 + 768,933 = $6,268,933

So, the cash flows of the project are: Time Cash flow 0 –$34,500,000 1 3,850,518 2 14,860,168 3 16,473,918 4 13,262,168 5 21,426,230

1. The payback period is: Payback period = 2 + ($15,789,315 / $16,473,918) Payback period = 2.96 years 2. The profitability index is: Profitability index = [($3,850,518 / 1.12) + ($14,860,168 / 1.122) + ($16,473,918 / 1.123) + ($13,262,168 / 1.124) + ($21,426,230 / 1.125)] / $34,500,000 Profitability index = 1.380 3. The project IRR is: IRR: –$34,500,000 = $3,850,518 / (1 + IRR) + $14,860,168 / (1 + IRR)2 + $16,473,918 / (1 + IRR)3 + $13,262,168 / (1 + IRR)4 + $21,426,230 / (1 + IRR)5 IRR = 23.80% 4. The project NPV is: NPV = –$34,500,000 + $3,850,518 / 1.12 + $14,860,168 / 1.122 + $16,473,918 / 1.123 + $13,262,168 / 1.124 + $21,426,230 / 1.125 NPV = $13,096,371.21

5. Here we want to examine the sensitivity of NPV to changes in the price of the new SMART PHONE. The price at which the “new” NPV is calculated is irrelevant since the sensitivity will be the same. Assuming a price of $495, the pro forma cash flows will be:

Sales Year 1 Year 2 Year 3 Year 4 Year 5 Sales $31,680,000 $52,470,000 $43,065,000 $38,610,000 $26,730,000 VC 13,120,000 21,730,000 17,835,000 15,990,000 11,070,000 Fixed costs 5,100,000 5,100,000 5,100,000 5,100,000 5,100,000 Depreciation 4,930,050 8,449,050 6,034,050 4,309,050 3,080,850 EBT $8,529,950 $17,190,950 $14,095,950 $13,210,950 $7,479,150 Tax 2,985,483 6,016,833 4,933,583 4,623,833 2,617,703 NI $5,544,468 $11,174,118 $9,162,368 $8,587,118 $4,861,448 + Depreciation 4,930,050 8,449,050 6,034,050 4,309,050 3,080,850 OCF $10,474,518 $19,623,168 $15,196,418 $12,896,168 $7,942,298 NWC Beg $0 $6,336,000 $10,494,000 $8,613,000 $7,722,000 End 6,336,000 10,494,000 8,613,000 7,722,000 0 NWC CF –$6,336,000 –$4,158,000 $1,881,000 $891,000 $7,722,000 Net CF $4,138,518 $15,465,168 $17,077,418 $13,787,168 $15,664,298

BV of equipment = $34,500,000 – 4,930,050 – 8,449,050 – 6,034,050 – 4,309,050 – 3,080,850 BV of equipment = $7,696,950 Taxes on sale of equipment = (BV – MV)(TC) = ($7,696,950 – 5,500,000)(.35) = $768,933 CF on sale of equipment = $5,500,000 + 768,933 = $6,268,933 So, the cash flows of the project under this price assumption are: Time Cash flow 0 –$34,500,000 1 4,138,518 2 15,465,168 3 17,077,418 4 13,787,168 5 21,933,230

The NPV with this sales price is: NPV = –$34,500,000 + $4,138,518 / 1.12 + $15,465,168 / 1.122 + $17,077,418 / 1.123 + $13,787,168 / 1.124 + $21,933,230 / 1.125 NPV = $14,886,708.15 And the sensitivity of changes in the NPV to changes in the price is: ΔNPV/ΔP = ($13,096,371.21 – 14,886,708.15) / ($485 – 495) ΔNPV/ΔP = $179,033.69 For every dollar change in price of the new SMART PHONE, the NPV of the project changes

$179,033.69 in the same direction. 6. Here we want to examine the sensitivity of NPV to changes in the quantity sold. The calculations for

sensitivity to changes in quantity are similar to the original cash flows. The only difference is that we will change the quantity sold of the new SMART PHONE. We will increase unit sold by 100 units per year. Remember that the quantity we choose is irrelevant: The final answer we want, the sensitivity of NPV to a one unit per year change in sales, will be the same regardless of the quantity we choose. The projections with the new quantity are:

Sales Year 1 Year 2 Year 3 Year 4 Year 5 Sales $31,088,500 $51,458,500 $42,243,500 $37,878,500 $26,238,500 VC 13,140,500 21,750,500 17,855,500 16,010,500 11,090,500 Fixed costs 5,100,000 5,100,000 5,100,000 5,100,000 5,100,000 Depreciation 4,930,050 8,449,050 6,034,050 4,309,050 3,080,850 EBT $7,917,950 $16,158,950 $13,253,950 $12,458,950 $6,967,150 Tax 2,771,283 5,655,633 4,638,883 4,360,633 2,438,503 NI $5,146,668 $10,503,318 $8,615,068 $8,098,318 $4,528,648 + Depreciation 4,930,050 8,449,050 6,034,050 4,309,050 3,080,850 OCF $10,076,718 $18,952,368 $14,649,118 $12,407,368 $7,609,498 NWC Beg $0 $6,217,700 $10,291,700 $8,448,700 $7,575,700 End 6,217,700 10,291,700 8,448,700 7,575,700 0 NWC CF –$6,217,700 –$4,074,000 $1,843,000 $873,000 $7,575,700 Net CF $3,859,018 $14,878,368 $16,492,118 $13,280,368 $15,185,198

BV of equipment = $34,500,000 – 4,930,050 – 8,449,050 – 6,034,050 – 4,309,050 – 3,080,850 BV of equipment = $7,696,950 Taxes on sale of equipment = (BV – MV)(TC) = ($7,696,950 – 5,500,000)(.35) = $768,933 CF on sale of equipment = $5,500,000 + 768,933 = $6,268,933

So, the cash flows of the project under this quantity assumption are: Time Cash flow 0 –$34,500,000 1 3,859,018 2 14,878,368 3 16,492,118 4 13,280,368 5 21,454,130

The NPV under this assumption is: NPV = –$34,500,000 + $3,859,018 / 1.12 + $14,878,368 / 1.122 + $16,492,118 / 1.123 + $13,280,368 / 1.124 + $21,454,130 / 1.125 NPV = $13,158,821.46 So, the sensitivity of NPV to units sold is: ΔNPV/ΔQ = ($13,158,821.46 – 13,096,371.21) / 100 ΔNPV/ΔQ = $624.50 For a one unit per year change in quantity sold of the new SMART PHONE, the NPV of the project

changes $624.50 in the same direction. 7. Since the NPV is positive, the company should undertake the project. 8. We include the lost sales as a reduction in the sales for the new project. Also, we would need to

reduce the variable costs for the lost sales of the existing models.

Homework is Completed By:

Writer Writer Name Amount Client Comments & Rating
Instant Homework Helper

ONLINE

Instant Homework Helper

$36

She helped me in last minute in a very reasonable price. She is a lifesaver, I got A+ grade in my homework, I will surely hire her again for my next assignments, Thumbs Up!

Order & Get This Solution Within 3 Hours in $25/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 3 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

Order & Get This Solution Within 6 Hours in $20/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 6 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

Order & Get This Solution Within 12 Hours in $15/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 12 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

6 writers have sent their proposals to do this homework:

Accounting & Finance Master
Study Master
A Grade Exams
Finance Master
Engineering Solutions
Isabella K.
Writer Writer Name Offer Chat
Accounting & Finance Master

ONLINE

Accounting & Finance Master

I have read your project details. I can do this within your deadline.

$143 Chat With Writer
Study Master

ONLINE

Study Master

Hello, I an ranked top 10 freelancers in academic and contents writing. I can write and updated your personal statement with great quality and free of plagiarism

$74 Chat With Writer
A Grade Exams

ONLINE

A Grade Exams

I am known as Unrivaled Quality, Written to Standard, providing Plagiarism-free woork, and Always on Time

$66 Chat With Writer
Finance Master

ONLINE

Finance Master

I have read and understood all your initial requirements, and I am very professional in this task.

$170 Chat With Writer
Engineering Solutions

ONLINE

Engineering Solutions

I am known as Unrivaled Quality, Written to Standard, providing Plagiarism-free woork, and Always on Time

$161 Chat With Writer
Isabella K.

ONLINE

Isabella K.

I have read your project details. I can do this within your deadline.

$100 Chat With Writer

Let our expert academic writers to help you in achieving a+ grades in your homework, assignment, quiz or exam.

Similar Homework Questions

Marvel make your own superhero - Berenstein catheter boston scientific - Three springs in series - The hero of haarlem questions and answers - Dragonfly red tidal settings - Sayyid qutb hsc notes - Macbeth movie 2006 online - Language and Speech Disorder Matrix - Essay guru only - Computer work attached - Mylabs px pearsoned - List of evaluative words - Reflecting on Reading #1 - Enterprise Risk Management - Sugars - International journal of sustainable economies management - Phar mor case study solution - Output frequency of decade counter - Cateye double wireless sensor - Features of an informative text - How to standardize an argument - Factors influencing an Online Purchase - Seppelt great western imperial reserve - Nature checklist for authors - Bowler man and co lawyers - The lancaster corporation's income statement - Queen mab speech analysis - Metaphors in the outsiders - Awakenings movie assignment answer key - Ez pleeze task 3 executive summary - How to differentiate a log - Juvenile justice 3 - 15th century research - Reflection - Construction induction training melbourne - Week 7 Discussion - Food Essay - Engineering undergraduate vacation student - Social media makes us lonely essay - What makes water so special - 1560 kj to cal - Who supported the heliocentric model - Caroma torres urinal suite - Amyr name of the wind - Ends ways and means model - Equating coefficients khan academy - Gateway cengage new account success html - Ground grid integrity testing - Cmgtt 111 - Liebeck v mcdonald's case brief - Romeo and juliet act 5 test - Bowles and gintis 1976 - Letter to principal from student examples - Directed writing assignment - 125 mcg to mg - Ap biology cheat sheet - Project(NS - Precision worldwide case solution - Week -3 research paper -832 - Does metal expand in heat - Aspen gastro stop dosage - How to compute z score in spss - 2x 75 WORD POSITIVE FEEDBACK RESPONSE DUE 10/4 - Difference between triangle and quadrilateral - Master test plan template - 2x 4 6x 9 - The founder of baha'i wrote - Www mysciencedoodles com water cycle - List the four basic acts of the overarching biblical story - Isometric and orthographic drawing - Research paper - Hedging currency risks at aifs excel solution - 11029 - Operation and project management - 4 glade court greenwith - Kostrivas company has gathered the following information - Discussion - Assignement - Problem Set - Combinations and compositions of functions - Bruce dawe the wholly innocent - The handsomest drowned man in the world theme - Elsevier article template word - Writing business letters useful phrases - Greg doucette cookbook 2 pdf - PROJECT MANAGEMENT (EARNED VALUE ANALYSIS) Assignment 6 - Physical security, security planning and Influence of Physical Design - A project may have multiple irrs when - Average fixed costs diminish continuously as output increases - Need by tomorrow - Difference between test-retest and intra-rater reliability - Macbeth observation interpretation and critique - Any individual with a security clearance can derivatively classify information - Health finance discussion - Complete currency consulting ltd - Darlington pair gain calculation - Sociology powerpoint template - Body like a cereal box - Right sided ecg placement - Point loma high school yearbook - Mackay coastal waters forecast - Red bull wall to wall production