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?