Conch Republic is an electronics manufacturer. One of the major revenue producing items is a PDA. It currently has one PDA on the market with excellent sales. Conch spent 750,000 to develop a prototype for a new PDA and spent a further 200,000 for a marketing study to determine the expected sales figures for the new PDA. They can make the new PDA for $155 each in variable costs. Fixed costs are estimated to be 4.7 million per year. Estimated ales volume is 74000, 95000, 125000, 105000, and 80000 per year for the next five years, respectibely. Unit price for new PDA will be $360. Necessary equipment can be purchased for 21.5 million and will be depreciated on a 7 year MACRS schedule. In 5 yrs, the equipment will be worth 4.1 million. As stated, they already have a current model of the pda. Production of that PDA is set to be terminated in two years. If Conch does not introduce the new PDA, sales will be 80000 and 60000 for the next two years, respectively. The current PDA sells for 290 each with variable costs of 120 each and fixed costs of 1,800,000 a year. If Conch does not introduce the new PDA, sales of the exisiting PDA will fall by 15000 units a yr and price on current PDA will have to be lowered to 255 each. Net working capital for the PDAs will be 20% of sales and will occur with the timing of the cash flows for the year, for example, there is no initial outlay for the net working capital, but changes in net working capital will first occur in year 1 with the first years sales. Conch has a 35% tax rate and a 12% required return.
Prepare a report in EXCEL that answers the following.
What is the payback period of the project?
What is the profitability index of the project?
What is the IRR of the project?
What is the NPV of the project?