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Lesson #5, Assignment #6 - Chapter 11 Conch Republic...

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Chapter 11 Conch Republic Electronics, Part 2 Input Area: Equipment $21,500,000 Salvage value $4,100,000 R&D $750,000 sunk cost Marketing study $200,000 sunk cost Year 1 Year 2 Year 3 Sales(units) 74,000 95,000 125,000 Depreciation rate 14.29% 24.49% 17.49% Sales of old PDA 80,000 60,000 Lost sales 15,000 15,000 Price $360 VC $155 FC $4,700,000 Price of old PDA $290 Price reduction of old PDA $35 VC of old PDA $120 Tax rate 35% NWC percentage 20% Required return 12% Sensivity analysis New price $370 Quantity change 100 NOTE: Change in units per year Output Area: Question 1: Sensitivity to change in price Sales Year 1 Year 2 Year 3 New $27,380,000 $35,150,000 $46,250,000 Lost sales 4,350,000 4,350,000 Lost rev. 2,275,000 1,575,000
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Net sales $20,755,000 $29,225,000 $46,250,000 VC New $11,470,000 $14,725,000 $19,375,000 Lost sales 1,800,000 1,800,000 $9,670,000 $12,925,000 $19,375,000 Sales $20,755,000 $29,225,000 $46,250,000 VC 9,670,000 12,925,000 19,375,000 Fixed costs 4,700,000 4,700,000 4,700,000 Dep 3,072,350 5,265,350 3,760,350 EBT $3,312,650 $6,334,650 $18,414,650 Tax 1,159,428 2,217,128 6,445,128 NI $2,153,223 $4,117,523 $11,969,523 +Dep 3,072,350 5,265,350 3,760,350 OCF $5,225,573 $9,382,873 $15,729,873 NWC Beg $0 $4,151,000 $5,845,000 End 4,151,000 5,845,000 9,250,000 NWC CF ($4,151,000) ($1,694,000) ($3,405,000) Net CF $1,074,573 $7,688,873 $12,324,873 Salvage BV of equipment $4,796,650 Taxes 243,828 Salvage CF $4,343,828 Net CF Time 0 $(21,500,000) 1 $1,074,573 2 $7,688,873 3 $12,324,873 4 $14,038,623 5 $16,566,983 NPV $12,683,911.80 $(29,970.02) Question 2: Sensitivity to change in quantity NPV/ P
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Sales Year 1 Year 2 Year 3 New $26,676,000 $34,236,000 $45,036,000 Lost sales 4,350,000 4,350,000 Lost rev. 2,275,000 1,575,000 Net sales $20,051,000 $28,311,000 $45,036,000 VC New $11,485,500 $14,740,500 $19,390,500 Lost sales 1,800,000 1,800,000 $9,685,500 $12,940,500 $19,390,500 Sales $20,051,000 $28,311,000 $45,036,000 VC 9,685,500 12,940,500 19,390,500 Fixed costs 4,700,000 4,700,000 4,700,000 Dep 3,072,350
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