PRICE SENSITIVITY ANALYSIS

Base Case Worst Case Best Case

Price $ 480 $ 456 $ 504
Variance $ (24) $ 24
% -5% 5%

Conch Republic Electronics

Summary - Investment Decision

No Investment Criteria Best Case Worst Case Best Case Target Conclusion
1 Payback Period 3.15 3.38 2.95 < 4 Years Accepted
2 Profitability Index 1.48 1.34 1.61 >1 Accepted
3 IRR 25% 22% 29% > 12% Accepted
4 NPV $ 18,304,125 $ 13,107,874 $ 23,500,376 Positive Accepted
5 Cummulative Cash Flow $ 46,998,250 $ 39,525,850 $ 54,470,650

Conch Republic Electronics

Summary - Sensitivity

No Investment Criteria Best Case Worst Case Best Case

1 Payback Period 0.23 (0.19)
2 Profitability Index (0.13) 0.13
3 IRR -4% 4%
4 NPV $ (5,196,251) $ 5,196,251
5 Cummulative Cash Flow $ (7,472,400) $ 7,472,400

Conclusion:

- When the price is changed by +/- 5%, the NPV will increase/decrease by $5.2 mio and the cumulative cash flow will incre
- When the sales volume is changed by +/- 5%, the NPV will increase/decrease by $3.1 mio and the cumulative cash flow w
This case is more sensitive to price
 VOLUME SENSITIVITY ANALYSIS
Y1 Y2 Y3 Y4
Base Case 74,000 95,000 125,000 105,000
Worst Case 70,300 90,250 118,750 99,750
Best Case 77,700 99,750 131,250 110,250

Conch Republic Electronics

Summary - Investment Decision

No Investment Criteria Best Case Worst Case Best Case

1 Payback Period 3.15 3.27 3.04
2 Profitability Index 1.48 1.39 1.56
3 IRR 25% 23% 28%
4 NPV $ 18,304,125 $ 15,169,566 $ 21,438,684
5 Cummulative Cash Flow $ 46,998,250 $ 42,405,838 $ 51,590,663

Conch Republic Electronics

Summary - Sensitivity

No Investment Criteria Best Case Worst Case Best Case

1 Payback Period 0.12 (0.11)
2 Profitability Index (0.08) 0.08
3 IRR -2% 2%
4 NPV $ (3,134,559) $ 3,134,559
5 Cummulative Cash Flow $ (4,592,413) $ 4,592,413

ative cash flow will increase/decrease by $7.5 mio.

e cumulative cash flow will increase/decrease by $4.6 mio.
 Y5 %
80,000
76,000 -5%
84,000 5%

Target Conclusion
< 4 Years Accepted
>1 Accepted
> 12% Accepted
Positive Accepted
PRICE SENSITIVITY ANALYSIS
5%
Base Case Worst Case Best Case
Price $ 480 $ 456 $ 504

BASE CASE
1. Projected Income Statement

Year
1 2
Price $ 480 $ 480
Volume 74,000 95,000
Sales $ 35,520,000 $ 45,600,000
Side Effect $ (6,925,000) $ (6,225,000)
Sales - Adjusted $ 28,595,000 $ 39,375,000

Variable Cost/Unit $ 185 $ 185

Volume 74,000 95,000
Variable Cost $ (13,690,000) $ (17,575,000)
Side Effect $ 1,875,000 $ 1,875,000
Variable Cost - Adjusted $ (11,815,000) $ (15,700,000)

Fixed Cost $ (5,300,000) $ (5,300,000)

Depreciation $ (5,501,650) $ (9,428,650)
EBIT $ 5,978,350 $ 8,946,350
Taxes $ (2,092,423) $ (3,131,223)
Net Income $ 3,885,928 $ 5,815,128
OCF $ 9,387,578 $ 15,243,778

2. Projected Cash Flow

Year
0 1 2
Operating Cash Flow $ 9,387,578 $ 15,243,778
Change in NWC $ (5,719,000) $ (2,156,000)
Recovery of NWC
Capital Spending $ (38,500,000)
Projected Cash Flow $ (38,500,000) $ 3,668,578 $ 13,087,778

Cummulative Cash Flow $ (38,500,000) $ (34,831,423) $ (21,743,645)

Discounted Cash Flow $ (38,500,000) $ 3,275,516 $ 10,433,496
@12%
3. Payback Period 3.15

4. Profitability Index 1.48

5. IRR 25%

6. NPV $ 18,304,125
 WORST CASE
1. Projected Income Statement

Year
3 4 5
$ 480 $ 480 $ 480 Price
125,000 105,000 80,000 Volume
$ 60,000,000 $ 50,400,000 $ 38,400,000 Sales
Side Effect
$ 60,000,000 $ 50,400,000 $ 38,400,000 Sales - Adjusted

$ 185 $ 185 $ 185 Variable Cost/Unit

125,000 105,000 80,000 Volume
$ (23,125,000) $ (19,425,000) $ (14,800,000) Variable Cost
Side Effect
$ (23,125,000) $ (19,425,000) $ (14,800,000) Variable Cost - Adjusted

$ (5,300,000) $ (5,300,000) $ (5,300,000) Fixed Cost

$ (6,733,650) $ (4,808,650) $ (3,438,050) Depreciation
$ 24,841,350 $ 20,866,350 $ 14,861,950 EBIT
$ (8,694,473) $ (7,303,223) $ (5,201,683) Taxes
$ 16,146,878 $ 13,563,128 $ 9,660,268 Net Income
$ 22,880,528 $ 18,371,778 $ 13,098,318 OCF

2. Projected Cash Flow

Year
3 4 5
$ 22,880,528 $ 18,371,778 $ 13,098,318 Operating Cash Flow
$ (4,125,000) $ 1,920,000 $ 2,400,000 Change in NWC
$ 7,680,000 Recovery of NWC
$ 6,516,273 Capital Spending
$ 18,755,528 $ 20,291,778 $ 29,694,590 Projected Cash Flow

$ (2,988,118) $ 17,303,660 $ 46,998,250 Cummulative Cash Flow

$ 13,349,814 $ 12,895,791 $ 16,849,508 Discounted Cash Flow
@12%
3. Payback Period

4. Profitability Index

5. IRR

6. NPV
 - - - - -
Year
1 2 3 4 5
$ 456 $ 456 $ 456 $ 456 $ 456
74,000 95,000 125,000 105,000 80,000
$ 33,744,000 $ 43,320,000 $ 57,000,000 $ 47,880,000 $ 36,480,000
$ (6,925,000) $ (6,225,000) $ - $ - $ -
$ 26,819,000 $ 37,095,000 $ 57,000,000 $ 47,880,000 $ 36,480,000

$ 185 $ 185 $ 185 $ 185 $ 185

74,000 95,000 125,000 105,000 80,000
$ (13,690,000) $ (17,575,000) $ (23,125,000) $ (19,425,000) $ (14,800,000)
$ 1,875,000 $ 1,875,000 $ - $ - $ -
$ (11,815,000) $ (15,700,000) $ (23,125,000) $ (19,425,000) $ (14,800,000)

$ (5,300,000) $ (5,300,000) $ (5,300,000) $ (5,300,000) $ (5,300,000)

$ (5,501,650) $ (9,428,650) $ (6,733,650) $ (4,808,650) $ (3,438,050)
$ 4,202,350 $ 6,666,350 $ 21,841,350 $ 18,346,350 $ 12,941,950
$ (1,470,823) $ (2,333,223) $ (7,644,473) $ (6,421,223) $ (4,529,683)
$ 2,731,528 $ 4,333,128 $ 14,196,878 $ 11,925,128 $ 8,412,268
$ 8,233,178 $ 13,761,778 $ 20,930,528 $ 16,733,778 $ 11,850,318

Year
0 1 2 3 4 5
$ 8,233,178 $ 13,761,778 $ 20,930,528 $ 16,733,778 $ 11,850,318
$ (5,363,800) $ (2,055,200) $ (3,981,000) $ 1,824,000 $ 2,280,000
$ 7,296,000
$ (38,500,000) $ - $ - $ - $ - $ 6,516,273
$ (38,500,000) $ 2,869,378 $ 11,706,578 $ 16,949,528 $ 18,557,778 $ 27,942,590

$ (38,500,000) $ (35,630,623) $ (23,924,045) $ (6,974,518) $ 11,583,260 $ 39,525,850

$ (38,500,000) $ 2,561,944 $ 9,332,412 $ 12,064,339 $ 11,793,803 $ 15,855,376
 3.38

1.34

22%

$ 13,107,874
BEST CASE
1. Projected Income Statement
- -
Year
1 2
Price $ 504 $ 504
Volume 74,000 95,000
Sales $ 37,296,000 $ 47,880,000
Side Effect $ (6,925,000) $ (6,225,000)
Sales - Adjusted $ 30,371,000 $ 41,655,000

Variable Cost/Unit $ 185 $ 185

Volume 74,000 95,000
Variable Cost $ (13,690,000) $ (17,575,000)
Side Effect $ 1,875,000 $ 1,875,000
Variable Cost - Adjusted $ (11,815,000) $ (15,700,000)

Fixed Cost $ (5,300,000) $ (5,300,000)

Depreciation $ (5,501,650) $ (9,428,650)
EBIT $ 7,754,350 $ 11,226,350
Taxes $ (2,714,023) $ (3,929,223)
Net Income $ 5,040,328 $ 7,297,128
OCF $ 10,541,978 $ 16,725,778

2. Projected Cash Flow

Year
0 1 2
Operating Cash Flow $ 10,541,978 $ 16,725,778
Change in NWC $ (6,074,200) $ (2,256,800)
Recovery of NWC
Capital Spending $ (38,500,000) $ - $ -
Projected Cash Flow $ (38,500,000) $ 4,467,778 $ 14,468,978

Cummulative Cash Flow $ (38,500,000) $ (34,032,223) $ (19,563,245)

Discounted Cash Flow $ (38,500,000) $ 3,989,087 $ 11,534,580
@12%
3. Payback Period 2.95

4. Profitability Index 1.61

5. IRR 29%

6. NPV $ 23,500,376
 - - -
Year
3 4 5
$ 504 $ 504 $ 504
125,000 105,000 80,000
$ 63,000,000 $ 52,920,000 $ 40,320,000
$ - $ - $ -
$ 63,000,000 $ 52,920,000 $ 40,320,000

$ 185 $ 185 $ 185

125,000 105,000 80,000
$ (23,125,000) $ (19,425,000) $ (14,800,000)
$ - $ - $ -
$ (23,125,000) $ (19,425,000) $ (14,800,000)

$ (5,300,000) $ (5,300,000) $ (5,300,000)

$ (6,733,650) $ (4,808,650) $ (3,438,050)
$ 27,841,350 $ 23,386,350 $ 16,781,950
$ (9,744,473) $ (8,185,223) $ (5,873,683)
$ 18,096,878 $ 15,201,128 $ 10,908,268
$ 24,830,528 $ 20,009,778 $ 14,346,318

Year
3 4 5
$ 24,830,528 $ 20,009,778 $ 14,346,318
$ (4,269,000) $ 2,016,000 $ 2,520,000
$ 8,064,000
$ - $ - $ 6,516,273
$ 20,561,528 $ 22,025,778 $ 31,446,590

$ 998,283 $ 23,024,060 $ 54,470,650

$ 14,635,289 $ 13,997,780 $ 17,843,640
VOLUME SENSITIVITY ANALYSIS

Y1 Y2 Y3
Base Case 74,000 95,000 125,000
Worst Case 70,300 90,250 118,750
Best Case 77,700 99,750 131,250

BASE CASE
1. Projected Income Statement

Year
1 2
Price $ 480 $ 480
Volume 74,000 95,000
Sales $ 35,520,000 $ 45,600,000
Side Effect $ (6,925,000) $ (6,225,000)
Sales - Adjusted $ 28,595,000 $ 39,375,000

Variable Cost/Unit $ 185 $ 185

Volume 74,000 95,000
Variable Cost $ (13,690,000) $ (17,575,000)
Side Effect $ 1,875,000 $ 1,875,000
Variable Cost - Adjusted $ (11,815,000) $ (15,700,000)

Fixed Cost $ (5,300,000) $ (5,300,000)

Depreciation $ (5,501,650) $ (9,428,650)
EBIT $ 5,978,350 $ 8,946,350
Taxes $ (2,092,423) $ (3,131,223)
Net Income $ 3,885,928 $ 5,815,128
OCF $ 9,387,578 $ 15,243,778

2. Projected Cash Flow

Year
0 1 2
Operating Cash Flow $ 9,387,578 $ 15,243,778
Change in NWC $ (5,719,000) $ (2,156,000)
Recovery of NWC
Capital Spending $ (38,500,000)
Projected Cash Flow $ (38,500,000) $ 3,668,578 $ 13,087,778

Cummulative Cash Flow $ (38,500,000) $ (34,831,423) $ (21,743,645)

Discounted Cash Flow $ (38,500,000) $ 3,275,516 $ 10,433,496
@12%
3. Payback Period 3.15

4. Profitability Index 1.48

5. IRR 25%

6. NPV $ 18,304,125
 5%
Y4 Y5
105,000 80,000
99,750 76,000
110,250 84,000

WORST CASE
1. Projected Income Statement

Year
3 4 5
$ 480 $ 480 $ 480 Price
125,000 105,000 80,000 Volume
$ 60,000,000 $ 50,400,000 $ 38,400,000 Sales
Side Effect
$ 60,000,000 $ 50,400,000 $ 38,400,000 Sales - Adjusted

$ 185 $ 185 $ 185 Variable Cost/Unit

125,000 105,000 80,000 Volume
$ (23,125,000) $ (19,425,000) $ (14,800,000) Variable Cost
Side Effect
$ (23,125,000) $ (19,425,000) $ (14,800,000) Variable Cost - Adjusted

$ (5,300,000) $ (5,300,000) $ (5,300,000) Fixed Cost

$ (6,733,650) $ (4,808,650) $ (3,438,050) Depreciation
$ 24,841,350 $ 20,866,350 $ 14,861,950 EBIT
$ (8,694,473) $ (7,303,223) $ (5,201,683) Taxes
$ 16,146,878 $ 13,563,128 $ 9,660,268 Net Income
$ 22,880,528 $ 18,371,778 $ 13,098,318 OCF

2. Projected Cash Flow

Year
3 4 5
$ 22,880,528 $ 18,371,778 $ 13,098,318 Operating Cash Flow
$ (4,125,000) $ 1,920,000 $ 2,400,000 Change in NWC
$ 7,680,000 Recovery of NWC
$ 6,516,273 Capital Spending
$ 18,755,528 $ 20,291,778 $ 29,694,590 Projected Cash Flow

$ (2,988,118) $ 17,303,660 $ 46,998,250 Cummulative Cash Flow

$ 13,349,814 $ 12,895,791 $ 16,849,508 Discounted Cash Flow
@12%
3. Payback Period

4. Profitability Index

5. IRR

6. NPV
 - - - - -
Year
1 2 3 4 5
$ 480 $ 480 $ 480 $ 480 $ 480
70,300 90,250 118,750 99,750 76,000
$ 33,744,000 $ 43,320,000 $ 57,000,000 $ 47,880,000 $ 36,480,000
$ (6,925,000) $ (6,225,000) $ - $ - $ -
$ 26,819,000 $ 37,095,000 $ 57,000,000 $ 47,880,000 $ 36,480,000

$ 185 $ 185 $ 185 $ 185 $ 185

70,300 90,250 118,750 99,750 76,000
$ (13,005,500) $ (16,696,250) $ (21,968,750) $ (18,453,750) $ (14,060,000)
$ 1,875,000 $ 1,875,000 $ - $ - $ -
$ (11,130,500) $ (14,821,250) $ (21,968,750) $ (18,453,750) $ (14,060,000)

$ (5,300,000) $ (5,300,000) $ (5,300,000) $ (5,300,000) $ (5,300,000)

$ (5,501,650) $ (9,428,650) $ (6,733,650) $ (4,808,650) $ (3,438,050)
$ 4,886,850 $ 7,545,100 $ 22,997,600 $ 19,317,600 $ 13,681,950
$ (1,710,398) $ (2,640,785) $ (8,049,160) $ (6,761,160) $ (4,788,683)
$ 3,176,453 $ 4,904,315 $ 14,948,440 $ 12,556,440 $ 8,893,268
$ 8,678,103 $ 14,332,965 $ 21,682,090 $ 17,365,090 $ 12,331,318

Year
0 1 2 3 4 5
$ 8,678,103 $ 14,332,965 $ 21,682,090 $ 17,365,090 $ 12,331,318
$ (5,363,800) $ (2,055,200) $ (3,981,000) $ 1,824,000 $ 2,280,000
$ 7,296,000
$ (38,500,000) $ - $ - $ - $ - $ 6,516,273
$ (38,500,000) $ 3,314,303 $ 12,277,765 $ 17,701,090 $ 19,189,090 $ 28,423,590

$ (38,500,000) $ (35,185,698) $ (22,907,933) $ (5,206,843) $ 13,982,248 $ 42,405,838

$ (38,500,000) $ 2,959,199 $ 9,787,759 $ 12,599,286 $ 12,195,014 $ 16,128,308
 3.27

1.39

23%

$ 15,169,566
BEST CASE
1. Projected Income Statement
- -
Year
1 2
Price $ 480 $ 480
Volume 77,700 99,750
Sales $ 37,296,000 $ 47,880,000
Side Effect $ (6,925,000) $ (6,225,000)
Sales - Adjusted $ 30,371,000 $ 41,655,000

Variable Cost/Unit $ 185 $ 185

Volume 77,700 99,750
Variable Cost $ (14,374,500) $ (18,453,750)
Side Effect $ 1,875,000 $ 1,875,000
Variable Cost - Adjusted $ (12,499,500) $ (16,578,750)

Fixed Cost $ (5,300,000) $ (5,300,000)

Depreciation $ (5,501,650) $ (9,428,650)
EBIT $ 7,069,850 $ 10,347,600
Taxes $ (2,474,448) $ (3,621,660)
Net Income $ 4,595,403 $ 6,725,940
OCF $ 10,097,053 $ 16,154,590

2. Projected Cash Flow

Year
0 1 2
Operating Cash Flow $ 10,097,053 $ 16,154,590
Change in NWC $ (6,074,200) $ (2,256,800)
Recovery of NWC
Capital Spending $ (38,500,000) $ - $ -
Projected Cash Flow $ (38,500,000) $ 4,022,853 $ 13,897,790

Cummulative Cash Flow $ (38,500,000) $ (34,477,148) $ (20,579,358)

Discounted Cash Flow $ (38,500,000) $ 3,591,833 $ 11,079,233
@12%
3. Payback Period 3.04

4. Profitability Index 1.56

5. IRR 28%

6. NPV $ 21,438,684
 - - -
Year
3 4 5
$ 480 $ 480 $ 480
131,250 110,250 84,000
$ 63,000,000 $ 52,920,000 $ 40,320,000
$ - $ - $ -
$ 63,000,000 $ 52,920,000 $ 40,320,000

$ 185 $ 185 $ 185

131,250 110,250 84,000
$ (24,281,250) $ (20,396,250) $ (15,540,000)
$ - $ - $ -
$ (24,281,250) $ (20,396,250) $ (15,540,000)

$ (5,300,000) $ (5,300,000) $ (5,300,000)

$ (6,733,650) $ (4,808,650) $ (3,438,050)
$ 26,685,100 $ 22,415,100 $ 16,041,950
$ (9,339,785) $ (7,845,285) $ (5,614,683)
$ 17,345,315 $ 14,569,815 $ 10,427,268
$ 24,078,965 $ 19,378,465 $ 13,865,318

Year
3 4 5
$ 24,078,965 $ 19,378,465 $ 13,865,318
$ (4,269,000) $ 2,016,000 $ 2,520,000
$ 8,064,000
$ - $ - $ 6,516,273
$ 19,809,965 $ 21,394,465 $ 30,965,590

$ (769,393) $ 20,625,073 $ 51,590,663

$ 14,100,342 $ 13,596,569 $ 17,570,707
BREAK-EVEN ANALYSIS
*Disregard NWC and Capital Spending Changes

Item Information Accounting Break-Even Cash Break-Even

P $ 480
V $ 185 Net Income = 0 OCF = 0
MC $ 295 Net Income = EBIT X (1 - T) OCF = (S - VC - SE - FC) X (
FC $ 5,300,000 Net Income = (S - VC - SE - FC - D) X (1 - T) 0 = (S - VC - SE - FC) X (1 -
D1 $ 5,501,650 0 = [(P x Q) - (v x Q) - SE - FC - D] X 65% 0 = [(P x Q) - (v x Q) - SE -
D2 $ 9,428,650 0 = [Q (P - v) - SE - FC - D] X 65% 0 = [Q (P - v) - SE - FC] X 6
D3 $ 6,733,650 65% Q (P - v) = 65% (SE + FC + D) 65% Q (P - v) = 65% (SE +
D4 $ 4,808,650
D5 $ 3,438,050 Quantity at Zero Net Income Quantity at Zero OCF
SE1 $ 5,050,000 Y1 53,734 Y1
SE2 $ 4,350,000 Y2 64,673 Y2
T 35% Y3 40,792 Y3
RR 12% Y4 34,267 Y4
Initial $ 38,500,000 Y5 29,621 Y5
Cash Break-Even Financial Break-Even

NPV = PV - Initial Investment

OCF = (S - VC - SE - FC) X (1 - T) + (D X T) 0 = PV - Initial Investment
0 = (S - VC - SE - FC) X (1 - T) + (D X T) PV = Initial Investment
0 = [(P x Q) - (v x Q) - SE - FC] X 65% + (35% x D) Initial Investment = OCF X Annuity Factor
0 = [Q (P - v) - SE - FC] X 65% + 35% D
65% Q (P - v) = 65% (SE + FC) - 35% D
Annuity Factor 3.604776202345
Quantity at Zero OCF OCF $ 10,680,275
25,043
15,502 OCF = [Q (P - v) - SE - FC] X 65% + 35% D
5,675 OCF = [295 Q - SE - FC] X 65% + 35% D
9,189 65% (295 Q) = OCF - 35% D + 65% (SE + FC)
11,691
Quantity at Zero NPV
Y1 80,742
Y2 71,201
Y3 61,374
Y4 64,888
Y5 67,390
PRICE SENSITIVITY ANALYSIS

Base Case
Price $ 480

ACCOUNTING BREAK-EVEN
1. Projected Income Statement

Year
1 2
Price $ 480 $ 480
Volume 53,734 64,673
Sales $ 25,792,515 $ 31,043,227
Side Effect $ (6,925,000) $ (6,225,000)
Sales - Adjusted $ 18,867,515 $ 24,818,227

Variable Cost/Unit $ 185 $ 185

Volume 53,734 64,673
Variable Cost $ (9,940,865) $ (11,964,577)
Side Effect $ 1,875,000 $ 1,875,000
Variable Cost - Adjusted $ (8,065,865) $ (10,089,577)

Fixed Cost $ (5,300,000) $ (5,300,000)

Depreciation $ (5,501,650) $ (9,428,650)
EBIT $ - $ -
Taxes $ - $ -
Net Income $ - $ -
OCF $ 5,501,650 $ 9,428,650

2. Projected Cash Flow

Year
0 1 2
Operating Cash Flow $ 5,501,650 $ 9,428,650
Change in NWC
Recovery of NWC
Capital Spending $ (38,500,000)
Projected Cash Flow $ (38,500,000) $ 5,501,650 $ 9,428,650

Cummulative Cash Flow $ (38,500,000) $ (32,998,350) $ (23,569,700)

Discounted Cash Flow $ (38,500,000) $ 4,912,188 $ 7,516,462
@12%
3. Payback Period 6.50

4. Profitability Index 0.58

5. IRR -9%

6. NPV $ (16,271,645)
 CASH BREAK-EVEN
1. Projected Income Statement

Year
3 4 5
$ 480 $ 480 $ 480 Price
40,792 34,267 29,621 Volume
$ 19,580,176 $ 16,447,973 $ 14,217,844 Sales
Side Effect
$ 19,580,176 $ 16,447,973 $ 14,217,844 Sales - Adjusted

$ 185 $ 185 $ 185 Variable Cost/Unit

40,792 34,267 29,621 Volume
$ (7,546,526) $ (6,339,323) $ (5,479,794) Variable Cost
Side Effect
$ (7,546,526) $ (6,339,323) $ (5,479,794) Variable Cost - Adjusted

$ (5,300,000) $ (5,300,000) $ (5,300,000) Fixed Cost

$ (6,733,650) $ (4,808,650) $ (3,438,050) Depreciation
$ - $ - $ - EBIT
$ - $ - $ - Taxes
$ - $ - $ - Net Income
$ 6,733,650 $ 4,808,650 $ 3,438,050 OCF

2. Projected Cash Flow

Year
3 4 5
$ 6,733,650 $ 4,808,650 $ 3,438,050 Operating Cash Flow
Change in NWC
Recovery of NWC
Capital Spending
$ 6,733,650 $ 4,808,650 $ 3,438,050 Projected Cash Flow

$ (16,836,050) $ (12,027,400) $ (8,589,350) Cummulative Cash Flow

$ 4,792,879 $ 3,055,984 $ 1,950,842 Discounted Cash Flow
@12%
3. Payback Period

4. Profitability Index

5. IRR

6. NPV
 Year
1 2 3 4 5
$ 480 $ 480 $ 480 $ 480 $ 480
25,043 15,502 5,675 9,189 11,691
$ 12,020,458 $ 7,440,870 $ 2,724,103 $ 4,410,674 $ 5,611,513
$ (6,925,000) $ (6,225,000) $ - $ - $ -
$ 5,095,458 $ 1,215,870 $ 2,724,103 $ 4,410,674 $ 5,611,513

$ 185 $ 185 $ 185 $ 185 $ 185

25,043 15,502 5,675 9,189 11,691
$ (4,632,885) $ (2,867,835) $ (1,049,915) $ (1,699,947) $ (2,162,771)
$ 1,875,000 $ 1,875,000 $ - $ - $ -
$ (2,757,885) $ (992,835) $ (1,049,915) $ (1,699,947) $ (2,162,771)

$ (5,300,000) $ (5,300,000) $ (5,300,000) $ (5,300,000) $ (5,300,000)

$ (5,501,650) $ (9,428,650) $ (6,733,650) $ (4,808,650) $ (3,438,050)
$ (8,464,077) $ (14,505,615) $ (10,359,462) $ (7,397,923) $ (5,289,308)
$ 2,962,427 $ 5,076,965 $ 3,625,812 $ 2,589,273 $ 1,851,258
$ (5,501,650) $ (9,428,650) $ (6,733,650) $ (4,808,650) $ (3,438,050)
$ - $ - $ - $ - $ -

Year
0 1 2 3 4 5
$ - $ - $ - $ - $ -

$ (38,500,000)
$ (38,500,000) $ - $ - $ - $ - $ -

$ (38,500,000) $ (38,500,000) $ (38,500,000) $ (38,500,000) $ (38,500,000) $ (38,500,000)

$ (38,500,000) $ - $ - $ - $ - $ -
 #DIV/0!

Err:523

$ (38,500,000)
FINANCIAL BREAK-EVEN
1. Projected Income Statement

Year
1 2
Price $ 480 $ 480
Volume 80,742 71,201
Sales $ 38,755,956 $ 34,176,368
Side Effect $ (6,925,000) $ (6,225,000)
Sales - Adjusted $ 31,830,956 $ 27,951,368

Variable Cost/Unit $ 185 $ 185

Volume 80,742 71,201
Variable Cost $ (14,937,192) $ (13,172,142)
Side Effect $ 1,875,000 $ 1,875,000
Variable Cost - Adjusted $ (13,062,192) $ (11,297,142)

Fixed Cost $ (5,300,000) $ (5,300,000)

Depreciation $ (5,501,650) $ (9,428,650)
EBIT $ 7,967,115 $ 1,925,576
Taxes $ (2,788,490) $ (673,952)
Net Income $ 5,178,625 $ 1,251,625
OCF $ 10,680,275 $ 10,680,275

2. Projected Cash Flow

Year
0 1 2
Operating Cash Flow $ 10,680,275 $ 10,680,275
Change in NWC
Recovery of NWC
Capital Spending $ (38,500,000)
Projected Cash Flow $ (38,500,000) $ 10,680,275 $ 10,680,275

Cummulative Cash Flow $ (38,500,000) $ (27,819,725) $ (17,139,451)

Discounted Cash Flow $ (38,500,000) $ 9,535,960 $ 8,514,250
@12%
3. Payback Period 3.60

4. Profitability Index 1.00

5. IRR 12%

6. NPV $ (0)
 Year
3 4 5
$ 480 $ 480 $ 480
61,374 64,888 67,390
$ 29,459,602 $ 31,146,173 $ 32,347,011
$ - $ - $ -
$ 29,459,602 $ 31,146,173 $ 32,347,011

$ 185 $ 185 $ 185

61,374 64,888 67,390
$ (11,354,222) $ (12,004,254) $ (12,467,077)
$ - $ - $ -
$ (11,354,222) $ (12,004,254) $ (12,467,077)

$ (5,300,000) $ (5,300,000) $ (5,300,000)

$ (6,733,650) $ (4,808,650) $ (3,438,050)
$ 6,071,730 $ 9,033,269 $ 11,141,884
$ (2,125,106) $ (3,161,644) $ (3,899,659)
$ 3,946,625 $ 5,871,625 $ 7,242,225
$ 10,680,275 $ 10,680,275 $ 10,680,275

Year
3 4 5
$ 10,680,275 $ 10,680,275 $ 10,680,275

$ 10,680,275 $ 10,680,275 $ 10,680,275

$ (6,459,176) $ 4,221,099 $ 14,901,373

$ 7,602,009 $ 6,787,508 $ 6,060,275
Conch Republic Electronics
Basic Information

No Item Value Type Notes

1 Prototype $ 750,000 Sunk Cost Excluded
2 Marketing Study $ 200,000 Sunk Cost Excluded
3 Variable Cost $ 185 Yearly Each
4 Fixed Cost $ 5,300,000 Yearly
5 Price $ 480 Yearly Each
6 Equipment $ 38,500,000 Initial Investment MACRS - 7 years
7 Value of Equipment $ 5,400,000 Salvage Value In 5 years
8 Corporate Tax 35% Tax Rate
9 Required Return 12% Discount Rate
10 NWC 20% Yearly Based on Sales;
No Initial NWC

PRELIMINARY CALCULATION

1. Projected Sales

Year Volume Price Sales

1 74,000 $ 480 $ 35,520,000
2 95,000 $ 480 $ 45,600,000
3 125,000 $ 480 $ 60,000,000
4 105,000 $ 480 $ 50,400,000
5 80,000 $ 480 $ 38,400,000

2. Projected Variable Cost

Year Volume Cost Variable Cost

1 74,000 $ 185 $ 13,690,000
2 95,000 $ 185 $ 17,575,000
3 125,000 $ 185 $ 23,125,000
4 105,000 $ 185 $ 19,425,000
5 80,000 $ 185 $ 14,800,000

3. Depreciation - MACRS - 7 years

Year MACRS Initial Investment Depreciation Book Value

1 14.29% $ 38,500,000 $ 5,501,650 $ 32,998,350
2 24.49% $ 38,500,000 $ 9,428,650 $ 23,569,700
3 17.49% $ 38,500,000 $ 6,733,650 $ 16,836,050
 4 12.49% $ 38,500,000 $ 4,808,650 $ 12,027,400
5 8.93% $ 38,500,000 $ 3,438,050 $ 8,589,350
6 8.92% $ 38,500,000 $ 3,434,200 $ 5,155,150
7 8.93% $ 38,500,000 $ 3,438,050 $ 1,717,100
8 4.46% $ 38,500,000 $ 1,717,100 $ -

In 5 Years

Salvage Value $ 5,400,000

Book Value $ (8,589,350)
Difference $ (3,189,350)
Tax Savings $ 1,116,273
Aftertax Cash Flow $ 6,516,273
Conch Republic Electronics Conch Republic Electronics Conch Republic Electronics
Estimated Sales Volume MACRS - 7 Years Side Effect - Existing Product

Year Volume Year Seven-Year Scenario - No Project

1 74,000 1 14.29% Year
2 95,000 2 24.49% 1
3 125,000 3 17.49% 2
4 105,000 4 12.49%
5 80,000 5 8.93%
6 8.92% Scenario - Project
7 8.93% Year
8 4.46% 1
2

4a. NWC based on Sales 5. Side Effect

Year 1
Year Sales NWC Cash Flow Sales
0 Variable Cost
1 $ 35,520,000 $ 7,104,000 $ (7,104,000) Fixed Cost
2 $ 45,600,000 $ 9,120,000 $ (2,016,000) Depreciation
3 $ 60,000,000 $ 12,000,000 $ (2,880,000) EBIT
4 $ 50,400,000 $ 10,080,000 $ 1,920,000 Taxes
5 $ 38,400,000 $ 7,680,000 $ 2,400,000 Net Income
OCF
4a. NWC based on Sales Adj.
Year 2
Year Sales NWC Cash Flow Sales
0 Variable Cost
1 $ 28,595,000 $ 5,719,000 $ (5,719,000) Fixed Cost
2 $ 39,375,000 $ 7,875,000 $ (2,156,000) Depreciation
3 $ 60,000,000 $ 12,000,000 $ (4,125,000) EBIT
4 $ 50,400,000 $ 10,080,000 $ 1,920,000 Taxes
5 $ 38,400,000 $ 7,680,000 $ 2,400,000 Net Income
OCF
h Republic Electronics
Effect - Existing Product

ario - No Project
Volume Price Variable Cost Fixed Cost
80,000 $ 310 $ 125 $ 1,800,000
60,000 $ 310 $ 125 $ 1,800,000

ario - Project
Volume Price Variable Cost Fixed Cost
65,000 $ 275 $ 125 $ 1,800,000
45,000 $ 275 $ 125 $ 1,800,000

Project No Project Side Effect

$ 17,875,000 $ 24,800,000 $ (6,925,000)
$ (8,125,000) $ (10,000,000) $ 1,875,000
$ (1,800,000) $ (1,800,000) $ -
$ - $ - $ -
$ 7,950,000 $ 13,000,000 $ (5,050,000)
$ (2,782,500) $ (4,550,000) $ 1,767,500
$ 5,167,500 $ 8,450,000 $ (3,282,500)
$ 5,167,500 $ 8,450,000 $ (3,282,500)

Project No Project Side Effect

$ 12,375,000 $ 18,600,000 $ (6,225,000)
$ (5,625,000) $ (7,500,000) $ 1,875,000
$ (1,800,000) $ (1,800,000) $ -
$ - $ - $ -
$ 4,950,000 $ 9,300,000 $ (4,350,000)
$ (1,732,500) $ (3,255,000) $ 1,522,500
$ 3,217,500 $ 6,045,000 $ (2,827,500)
$ 3,217,500 $ 6,045,000 $ (2,827,500)