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-Spent $750,000 to develop a new PDA -Spent...

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-Spent $750,000 to develop a new PDA -Spent an additional $200,000 for marketing study to determine the expected sales. -Can manufacture the new PDA with variable cost of $185.00 each. -Fixed Costs for the operation are estimated at $5.3 million per year. -Unit Price $480.00 each -Necessary equipment to produce the PDA will cost $38.5million, with depreciation for 7 years (MACRS Schedule) -It is believed that this equipment after 5 years will be worth $5.4 million. -NWC will be 20% of Sales -Changes in NWC will occur in Year 1, with the first year sales. -Conch Republic Corporate Tax Rate is 35% and has a 12% required return. -Estimated sales volume per year is: 1. 74,000 2. 95,000 3. 125,000 4. 105,000 5. 80,000 Questions: 1) How sensitive is the NPV to changes in the price of the new smart phone? (Show all calculations) 2) How sensitive is the NPV to changes in the quantity sold of the new smart phone? (Show all calculations)

 

Paper#6941 | Written in 18-Jul-2015

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