Conch Republic Electronics Case

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| | Case #4 - Conch Republic Electronics| | | | |
| | | | | | | | |
| | Input Area:| | | | | | |
| | | | | | | | |
|  |  |  |  |  |  |  |  |
|  | Equipment| $15,000,000|  |  |  |  |  |
|  | Salvage value| $3,000,000|  |  |  |  |  | |  | R&D| $750,000| sunk cost|  |  |  |  | |  | Marketing study| $200,000| sunk cost|  |  |  |  | |  |  |  |  |  |  |  |  |

|  |  | Year 1| Year 2| Year 3| Year 4| Year 5|  | |  | Sales(units)| 70,000| 80,000| 100,000| 85,000| 75,000|  | |  | Depreciation rate| 14.29%| 24.49%| 17.49%| 12.49%| 8.93%|  | |  | Sales of old PDA| 80,000 | 60,000 |  |  |  |  | |  | Lost sales| 15,000| 15,000|  |  |  |  |

|  |  |  |  |  |  |  |  |
|  | Price| $250 |  |  |  |  |  |
|  | VC| $86 |  |  |  |  |  |
|  | FC| $3,000,000 |  |  |  |  |  |
|  | Price of old PDA| $240 |  |  |  |  |  | |  | Price reduction |  |  |  |  |  |  |
|  | of old PDA| $20 |  |  |  |  |  |
|  | VC of old PDA| $68 |  |  |  |  |  |
|  | Tax rate| 35%|  |  |  |  |  |
|  | NWC percentage| 20%|  |  |  |  |  |
|  | Required return| 12%|  |  |  |  |  |
|  |  |  |  |  |  |  |  |
|  | Sensivity analysis|  |  |  |  |  |  |
|  | New price| $260 |  |  |  |  |  |
|  | Quantity change| 100 | NOTE: Change in units per year|  |  |  | |  |  |  |  |  |  |  |  |
| | | | | | | | |
| | Output Area:| | | | | | |
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|  |  |  |  |  |  |  |  |
|  | Sales| Year 1| Year 2| Year 3| Year 4| Year 5|  | |  | New| $17,500,000 | $20,000,000 | $25,000,000 | $21,250,000 | $18,750,000 |  | |  | Lost sales| 3,600,000 | 3,600,000 |  |  |  |  | |  | Lost rev.| 1,300,000 | 900,000 |  |  |  |  | |  | Net sales| $12,600,000 | $15,500,000 | $25,000,000 | $21,250,000 | $18,750,000 |  | |  |  |  |  |  |  |  |  |

|  | VC|  |  |  |  |  |  |
|  | New| $6,020,000 | $6,880,000 | $8,600,000 | $7,310,000 | $6,450,000 |  | |  | Lost sales| 1,020,000 | 1,020,000 |  |  |  |  | |  |  | $5,000,000 | $5,860,000 | $8,600,000 | $7,310,000 | $6,450,000 |  | |  |  |  |  |  |  |  |  |

|  |  |  |  |  |  |  |  |
|  | Sales| $12,600,000 | $15,500,000 | $25,000,000 | $21,250,000 | $18,750,000 |  | |  | VC| 5,000,000 | 5,860,000 | 8,600,000 | 7,310,000 | 6,450,000 |  | |  | Fixed costs| 3,000,000 | 3,000,000 | 3,000,000 | 3,000,000 | 3,000,000 |  | |  | Dep| 2,143,500 | 3,673,500 | 2,623,500 | 1,873,500 | 1,339,500 |  | |  | EBT| $2,456,500 | $2,966,500 | $10,776,500 | $9,066,500 | $7,960,500 |  | |  | Tax| 859,775 | 1,038,275 | 3,771,775 | 3,173,275 | 2,786,175 |  | |  | NI| $1,596,725 | $1,928,225 | $7,004,725 | $5,893,225 | $5,174,325 |  | |  | +Dep| 2,143,500 | 3,673,500 | 2,623,500 | 1,873,500 | 1,339,500 |  | |  | OCF| $3,740,225 | $5,601,725 | $9,628,225 | $7,766,725 | $6,513,825 |  | |  |  |  |  |  |  |  |  |

|  | NWC|  |  |  |  |  |  |
|  | Beg| $0| $2,520,000| $3,100,000| $5,000,000| $4,250,000|  | |  | End| 2,520,000| 3,100,000| 5,000,000| 4,250,000| 0|  | |  | NWC CF| ($2,520,000)| ($580,000)| ($1,900,000)| $750,000 | $4,250,000 |  | |  |  |  |  |  |  |  |  |

|  | Net CF| $1,220,225 | $5,021,725 | $7,728,225 | $8,516,725 | $10,763,825 |  | |  |  |  |  |  |  |  |  |
|  | Salvage|  |  |  |  |  |  |
|  | BV of equipment| $3,346,500|  |  |  |  |  | |  | Taxes| 121,275|  |  |  |  |  |
|  | Salvage CF| $3,121,275|  |  |  |  |  |
|  |  |  |  |  |  |  |  |
|  | Net CF|...
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