Conch Republic Electronics 5

Topics: Investment, Finance, Risk Pages: 10 (2907 words) Published: November 4, 2011
| 2011|
| Paris Graduate School of Management- IEMBA
MAL-10087
|

[corproate financila managmenet]|
Assignment 1- Lecturer: Dr Lawrence|

Corporate Financial Management

2011

Assignment 1

Lecturer: Dr Lawrence

Question: Conch Republic Electronics, Part 1
Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelley Couts, who inherited the company. When it was founded over 70 years ago, the company originally repaired radios and other household appliances. Over the years, the company expanded into manufacturing and is now a reputable manufacturer of various electronic items. Jay McCanless, a recent MBA graduate, has been hired by the company's finance department.

One of the major revenue-producing items manufactured by Conch Republic is a personal digital assistant (PDA). Conch Republic currently has one PDA model on the market, and sales have been excellent. The PDA is a unique item in that it comes in a variety of tropical colours and is preprogramed to play Jimmy Buffett music. However, as with any electronic item, technology changes rapidly, and the current PDA has limited features in comparison with newer models. Conch Republic are now considering very seriously the development of a more sophisticated PDSA which would have all the features of the existing PDA but with additional features including cell phone capability and the ability to run different forms of productivity software desired by business, and other users including university students.

The capital requirement to develop this new sophisticated PDA was going to be quite significant. Management has accepted the fact that the financing of this new project would have to be made from existing cash resources and outside finance.

Consideration had also to be given in terms of the more appropriate business model to apply. Could the manufacturing of the new unit be made by an out source electronic manufacturer with expertise in this area or for Conch to use its existing manufacturing capability to do so. The key issues facing management for this project may be summed up as follows: 1. The Corporate financing risks involved

2. The rate of return expected for the project
3. The rate of return expected by outside investors
4. The decision making complexities for a project of this nature

Without having any specific figures or information to hand you (Jay McCanless) are however required to lay out the issues in an informative manner for the Board, who are not well versed in Corporate Finance, but who are required to make a presentation to their shareholders on their future plans.

This assignment may require you to make certain assumptions. Please state these assumptions. You should also consider the value of any Corporate Finance techniques or theories that may be applicable in your paper to the Board.

Please DO NOT explains these techniques or theories as you will be assessed on how well you understand and judge the applicability of these theories. Students who copy from their Finance Text books will fail this assignment

Contents
1.0 Introduction3
1.1 10 steps before launching new products3
1.2 Factors to consider before production3
2.0 Corporate Financing risks involved4
2.1 Insufficient Capital4
2.2 Projection Errors4
2.3 Secured Debt4
3.0 Rate of return expected for the project5
3.1 Risk premium5
3.2 Business risk5
3.3 Financial risk5
3.4 Liquidity risk6
3.5 Exchange Rate risk6
3.6 Country Risk6
3.7 Risk Premium6
4.0 Rate of return expected for the project6
4.1 Factor 1: General Economic Conditions6
4.2 Factor 2: Market Conditions7
4.3 Factor 3: Operating and Financing Decisions7
4.4 Factor 4: Amount of Financing7
Bibliography8

1.0 Introduction

Conch Republic Electronics has been manufacturing a single version of personal digital assistant (PDA). With fierce...

Bibliography: Braddy, R. (2010). 10 steps to take before launching new products. Retrieved from Charlie cook 's marketing for success: http://www.marketingforsuccess.com/blog/entrpreneur/product-launch/
Gartenstein, D. (2011). ehow money. Retrieved from Risks involved in leasing or financing for a setup business: http://www.ehow.com/list_7239425_risks-leasing-financing-startup-business.html
Miera, M. (2010). Constanta University. Retrieved from Factors determining the firm 's cost of capital: http://www.google.co.uk/url?sa=t&rct=j&q=factors%2Bto%2Bconsider%2Bfor%2Brate%2Bof%2Breturn&source=web&cd=4&ved=0CDcQFjAD&url=http%3A%2F%2Foeconomica.uab.ro%2Fupload%2Flucrari%2F920071%2F33.pdf&ei=tSagTuuwIImIrAeyyvGKAw&usg=AFQjCNGIbtKWWwcGAmFcR8V_joVDrAN
NSW. (2010). NWS Government. Retrieved from Launching new products & services: http://www.smallbiz.nsw.gov.au/grow/operations/launching/Pages/default.aspx
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