Home insert Page Layout fomalas tw Parte Copy Cosdtional Formut 8 Smart Phone, I

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Home insert Page Layout fomalas tw Parte Copy Cosdtional Formut 8 Smart Phone, Inc. is a small electronics fierms that has had success in developing smart phone handsets for the pr 9 production phase of a new smartphone that improves upon the Seatures of 1o developing prototypes and another $208,000 for marketing studies to determine the has had success in developing smart phone handsets for the prepaid smartphone market. The smart phione handsets for the prepaid smartphone market. The company is in the pre cureent models by adding new features, colors and sizes. The a company has atready spent $7sa,.000 expected sales figures tor new smartphones 12 SmarT Phone, Inc. can manufacture the new smart phone for $305 each in 3 estimated sales volume for the next 5 years is as acture the new smart phone for $aos each in vanable costs. Fixed costs for the operation are estimated to un s costs for the operation are estimated to run 35.1 million per year. The 16 18 20 21 2 The unit price of the new smart phone will be $485. The necessary equipment to manufacture the new smartohone can be purchased for $34.3 miltion and will be depreciabed 23 on a seven year MACRS schedule. The company believes that the value of the equipment in five years will be $3.3 mithion. The MACKS tax schedule for 7 24 presented below year property is Year Depreciation 27 1429% 124 IrnstructionsMutle Choice Case Problem 1Case Probiem 2 Search the web and Windows

Explanation / Answer

d) IRR = 24%(approx)

year Cashflow cummulative cashflow Discount rate 12% disc cashflow 0                       (34,500,000)                        (34,500,000)                                   1    (34,500,000) 1                            3,850,518                        (30,649,482) 0.8929         3,437,963 2                          14,860,168                        (15,789,314) 0.7972      11,846,435 3                          16,473,918                                684,604 0.7118      11,725,809 4                          13,262,168                          13,946,772 0.6355         8,428,348 5                          21,426,230                          35,373,002 0.5674      12,157,818 NPV      13,096,373 1) Payback period= 2+(15789314/16473918) 2.96 years 2) Profitability index= present value of future cashflow/initial investment required                                        1.38 (47596373/34500000) 3) NPV= 13096373(As calculated above in table)

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