A) CHAPTER CASE (8%) onch Republic Electronics nch Republic Electronics is a midsized electronics manufacturer located in Keey West, prida. The company president is Shelly Couts, who inherited the company. The company ginally repaired radios and other household appliances when it was founded more than 70 ars ago. Over the years, the company has expanded, and it is now a reputable manufacturer various specialty electronic items. Jay Mccanless, a recent MBA graduate, has been hired the company in its finance department. ne of the major revenue-producing items manufactured by Conch Republic is a smartphone. nch Republic currently has one smartphone model on the market and sales have been cellent. The smartphone is a unique item in that it comes in a variety of tropical colors and preprogrammed to play Jimmy Buffett music. However, as with any electronic item, chnology changes rapidly, and the current smartphone has limited features in comparison th newer models. Conch Republic spent $1.2 million to develop a prototype for a new hartphone that has all the features of the existing one but adds new features such as Wifi thering. The company has spent a further $250,000 for a marketing study to determine the pected sales figures for the new smartphone. nch Republic can manufacture the new smartphone for $210 each in variable costs. Fixed sts for the operation are estimated to run $5.3 million per year. The estimated sales lumes are 64,000, 106,000, 87,000, 78,000, and 54,000 per year for each of the next five ears, respectively. The unit price of the new smartphone will be $515. The necessary quipment can be purchased for $38.5 million and will be depreciated on a seven-year MACRS hedule. It is believed the value of the equipment in five years will be $5.8 million. t working capital for the smartphones will be 20 percent of sales and will occur with the ming of the cash flows for the year (i.e., there is no initial outlay for NWC). Changes in NWC us will occur first in Year 1 with the first year's sales. Conch Republic has a 22 percent rporate tax rate and a required return of 12 percent. elly has asked Jay to prepare a report that answers the following questions: 1. What is the payback period of the project? 2. What is the profitability index of the project? 3. What is the IRR of the project