1. What are the relevant cash flows? In the capital budgeting analysis of this low-price, low-calorie soda project, how shall we treat: a. the consultants market study cost? b. the potential rental value of the unoccupied annex? c. the interest charges? d. working capital?

2. Should we consider the erosion of the existing productthe regular sodasin the analysis? Why or why not?

3. Calculate the projects NPV, IRR, payback period, discounted payback, and profitability index.

4. Perform sensitivity analyses on sales volume, price, direct labor, materials, and energy cost. What do you observe? You can use the following scenarios for analysis:

Scenario 1: Perform a capital budgeting analysis with the information provided in the case.

Scenario 2: You have been advised by the consultants that the energy costs, the labor costs, and the material costs are likely to rise by 5% a year, starting in Year 2. The consultants do not think that you can pass the extra cost through. What do you observe?

Scenario 3: You have been advised by the consultants that the energy costs, the labor costs, and the material costs are likely to rise by 5% a year, starting in Year 2. The consultants think that you can pass part of the extra cost through. You should be able to increase the price per unit by 5%, but the volume would decrease by 2%. What do you observe?

5. What are the benefits and risks of undertaking this project?

6. Should Bebida Sol undertake this project?