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Smart Phones by Conch Republic
Finance & Accounting
Pages 4 (1004 words)
Name: Instructor’s Name: Course: Date: 26th June 2012. Mini Case Background The mini case in consideration is about the appraisal of the introduction of new smart phones by Conch Republic, a midsized firm of Key West, Florida which deals in the manufacturing of electric appliances.
Currently the company has its smart phone model in the market which has already earned company a good chunk of revenues. However, with the passage of time, Conch Republic keeps on investing more money in its research and development activities so that its major products continue to exist in the market without getting obsolete. As a result, the company has developed a new model of the existing smart phone which has different new features but the most popular one is that of Wi-Fi tethering. The company has planned to terminate the production of the existing smart phones in next two years, but have made the financial viability of the introduction of new smart phones. The proposed smart phones are estimated to have the useful life of around five years. The company has already incurred around $750,000 and $200,000 on the development of the prototype and the marketing campaign of the new smart phones respectively. However, both of these costs are not included in the investment appraisal computation of the new smart phones because they are assumed to be the sunk cost. Sunk costs are those which do not matter whether a certain project is either accepted or rejected, in this way, these two costs would have no impact upon the decision to accept or reject the new smart phone. ...
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