Conch Republic Electronic Case
1. What is the payback period of the project?
The payback period is 2,882 years.
2. What is the profitability index of the project?
The profitability index is 1,557.
3. What is the IRR of the project?
The IRR of the project is 28,31%.
4. What is the NPV of the project?
The NPV of the project is 18 096 790,85 $. For questions above please see the calculation paper in the attachment – page 1-2.
5. How sensitive is the NPV to changes in the price of the new PDA?
For each dollar change in the price, the project´s NPV will change 184 462,16 $ via the ...view middle of the document...
For complete calculation please see the attachment on page 2.
7. Should Conch Republic produce the new PDA?
Conch should have produce the new PDA because it has a positive NPV. Through a marketing strategy, Conch Republic had determined two important factors in the new product investment. They have determined that a new PDA will cost 500 $ and estimated sales of the new PDA over the next 5 years to be 65 000, 82 000, 108 000, 94 000 and 57 000 units. According those background materials, above there are recommendation that the new PDA should be profitable.
8. Suppose Conch Republic losses sales on other models because of the introduction of the new model. How would this affect your analysis?
The decision to introducing the new PDA on a market would however result, that the Conch Republic will lost sales on their older versions of established versions of PDA. Result of launching a new PDA would affect cash flows, so in this case, the cash flow should be adjusted downward to reflect lost profits on the older versions.
1. Block / Hirt / Danielsen (2008), Foundations of Financial Management (13th Edition), McGraw-Hill Higher Education
2. Peter D. Easton, John J. Wild, Robert F. Halsey and Mary Lea McAnally (2010), Financial Accounting for MBAs (4th Edition), Cambridge
1. Conch Republic Electronics_calculations.pdf