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Lesson #5, Assignment #6

# 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
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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