公司理财第九版课案例Conch Republic Electronics.docx

1、Conch Republic Electronics AnalysisAnalysis of Conch Republic ElectronicsDevelop a prototype$750000Sunk costMarket study$200000The new PDA:Variable cost per unit$155Fixed cost per year$4700000Price of per unit$360Necessary equipment$21500000DepreciationSeven-year MACRSSalvage value$4100000Tax rate35

2、%Required return12%YearMACRS PercentageDepreciationSales volume114.29%$3,072,35074000224.49%$5,265,35095000317.49%$3,760,350125000412.49%$2,685,35010500058.93%$1,919,95080000The existing model:Price per unit$290Variable cost per unit$120Fixed cost per year$1800000Sales volume of fall by per year1500

3、0Price be lowered of per unit$255Sales volume for year 180000Sales volume for year 260000There is no initial outlay for NWC; and Net Working Capital for the PDAs will be 20% of sales.The value of the equipment in five years will be $4.1 million.Introducing the new PDA, it causes the exiting PDA sale

4、s fall down and the price fall down.Therefore: sales for year 1=74000*$360-15000*$290-(80000-15000)*($290-$255)=$20015000Variable cost for year 1=74000*$155-15000*$120=$9670000Sales for year 2=95000*$360-15000*$290-(60000-15000)*($290-$255)=$28275000Variable cost for year 2=95000*$155-15000*$120=$12

5、925000Year12345Sales$20,015,000$28,275,000$45,000,000$37,800,000$28,800,000Variablecost$9,670,000$12,925,000$19,375,000$16,275,000$12,400,000Fixed cost$4,700,000$4,700,000$4,700,000$4,700,000$4,700,000Total cost$14,370,000$17,625,000$24,075,000$20,975,000$17,100,000Depreciation$3,072,350$5,265,350$3

6、,760,350$2,685,350$1,919,950EBIT$2,572,650$5,384,650$17,164,650$14,139,650$9,780,050Tax$900,427.50$1,884,627.50$6,007,627.50$4,948,877.50$3,423,017.50Net income$1,672,222.50$3,500,022.50$11,157,022.50$9,190,772.50$6,357,032.50Net working capital=sales*20%Project cash flow=Project operating cash flow

7、-Project changes in net working capital-project capital spendingOperating cash flow=EBIT+Depreciation-Taxes Change in NWC=Ending NWC-Beginning NWCYear12345Operating cash flow$4,744,572.50$8,765,372.50$14,917,372.50$11,876,122.50$8,276,982.50net working capital$4,003,000$5,655,000$9,000,000$7,560,000

8、$5,760,000initial NWC$0$4,003,000$5,655,000$9,000,000$7,560,000Ending NWC$4,003,000$5,655,000$9,000,000$7,560,000$0Change in NWC$4,003,000$1,652,000$3,345,000($1,440,000)($7,560,000)NET Cash flow$741,572.50$7,113,372.50$11,572,372.50$13,316,122.5015836982.5The book value of equipment after the depre

9、ciation=$21500000-$3,072,350 -$5,265,350-$3,760,350-$2,685,350-$1,919,950=$4796650Pretax salvage value of equipment=$4100000After-tax cash flow of equipment=$4100000+($4796650-$4100000)*35%=$4343827.5YearCash flow0($21,500,000.00)1$741,572.502$7,113,372.503$11,572,372.504$13,316,122.505$20180810Part

10、11 What is the payback period of the project?YearCash flowRemainingPV0($21,500,000.00)1$741,572.50($20,758,427.50)$662,118.302$7,113,372.50($13,645,055.00)$5,670,737.013$11,572,372.50($2,072,682.50)$8,236,986.174$13,316,122.50$11,243,440.00$8,462,636.585$20180810$11,451,133.56Payback period=3+ ($13,

11、316,122.50-$11,243,440.00)/ $13,316,122.50=3.16 years2. What is the profitability index of the project?PI= (the present value of the future cash flow)/(initial investment)PV of the future cash flow=$662,118.30+$5,670,737.01+$8,236,986.17+$8,462+$11,451,133.56=$34,483,611.62PI=$34,483,611.62 /$215000

12、00=1.603. What is the IRR of the project?IRR is the return that makes the NPV=0.Therefore:NPV=0=-$21500000+($741,572.50/(1+IRR)1)+($7,113,372.50/(1+IRR)2)+ ($11,572,372.50/(1+IRR)3)+ ($13,316,122.50/(1+IRR)4) ($20180810 / (1+IRR) 5)Use the EXCEL we can get the IRR=27.62%4. What is the NPV of the pro

13、ject?NPV=-$21500000+$662,118.30+$5,670,737.01+$8,236,986.17+$8,462,636.58+$11,451,133.56 =$12,983,611.62Part25. How sensitive is the NPV to change in the price of the new PDA?We suppose the price increase $10, so the price will be$370 per unitTherefore:Year12345Sales$20,755,000$29,225,000$46,250,000

14、$38,850,000$29,600,000Variablecost$9,670,000$12,925,000$19,375,000$16,275,000$12,400,000Fixed cost$4,700,000$4,700,000$4,700,000$4,700,000$4,700,000Total cost$14,370,000$17,625,000$24,075,000$20,975,000$17,100,000Depreciation$3,072,350$5,265,350$3,760,350$2,685,350$1,919,950EBIT$3,312,650$6,334,650$18,414,65