# Payback period, profitability index, IRR and NPV

Conch Republic Electronics

Spent $750,000 to develop a new PDA

Spent an additional $200,000 for marketing study to determine the expected sales.

Can manufacture the new PDA with variable cost for $155.00 each.

Fixed Costs for the operation are estimated at $4.7 million per year.

Unit Price $360.00 each

Necessary equipment to produce the PDA will cost $21.5 million, with depreciation for 7 years MACRS schedule.

It is believed that this equipment after 5 years will be worth $4.1 million.

NWC will be 20% of Sales

Changes in NWC will occur in Year 1, with the first year sales.

There is no initial outlay for NWC.

Conch Republic Corporate Tax Rate is 35% and has a 12% required return.

Estimated Sales Volumes:

NWC 20%

Estimated sales volume per year is

1. 74,000

2. 95,000

3. 125,000

4. 105,000

5. 80,000

What is the payback period, profitability index, IRR and the NPV of this project?

#### Solution Summary

The solution explains how to calculate the payback period, profitability index, IRR and NPV