Conch Republic Electronics, Part 1 Conch Republic Electronics is a midsized electrontics manuifacturer located in Key West, Florida, The company president is Shelley Couts, who inherited the compary. When it was focinded over 70 yean ago, the company originally repaired radios and other houseliold appliances. Over the years, the company expanded into nuntifictuting and is now a reputable manufacturer of yarions electronie items. Jay MoCanless, a recent MBA graduale, has beea hired by the cormany's finsnee department. One of the major revenueproducine items manafactured by Conch Repubfic is a somarrphone. Conch Republic currently has one + mnartphone model on the makket, and sales have leeed exeelent. The naartiphone is a imique item in that it comes in a variety of fropical colors and is preprogtammed to play Jimen Buffett misicic. Howeve, as with aly eloctronic item, fechnology changes fapidly, and the current shartphone has limited feotures in comparison with newer inodels Conch Rapoblic spent $950.000 to develop a prototype for a new smartphone that has all the features of the existing sitantphione but adds new features sach as Wifi tethering. The compary has spent a further $250,000 for a marketing study to determine the expected sales fleares for the new minartphone. Conch Repeblic can manufacture the new martphones for 5245 each to vatiahle costs. Foed costs for the operation are estimated to min 56.9 million per year. The estimated sales wolume is 160,000,170,000,130,000,105,000, and 80.000 per year for the next five sears. respectively. The unit price of the new smartphione will be $575. The necessary equipment can be purchased for 549.5 millica and will be As previously rasted, Conch Repablic currently mamifactites a imariphone. Production of the exiting nodel is expected to be ierminated iespectively: The price of the existing smattehone is $135 per unit, with variable costs of $155 each and fued costy of $4.3 million per jear. If Conch Repablic does latrodice the new imartphone, zales of the exition smartphone will fall by 30,000 units per year, and the ptice of the existing wits will have to be lowered to 5235 each. Net workine capital foc the smartphopes will be 20 peregat of sales and will occur with the timing of the casb flows for the year: for example. theie is no initial outhy for NWC. but ehanges in NWC will finst. occur in Year I with the first years tales. Conch Repoblic has a 21 percest corperate tax nate and a required return of 12 percent. Stielley has asked Jay to prepare a teport that answeit the followiag quecitions. QUESTIONS 1. What is the prytack period of the project? 2. What is the profitability index of the project? 3. What is the TRR of the project