Answers to Case Study:"Hola Kola" please.

After reading the "Hola Kola" Case study you are required to answer to the following questions:

1.What are the relevant cash flows in the capital budgeting analysis of this low-price, low-calorie soda project? How should you treat:

The consultant's market study cost?

The potential rental value of the unoccupied annex?

The interest charges?

Working Capital?

2.Should you consider the erosion of the existing product - the regular sodas - in the analysis? Why or why not?

3.Calculate the project's NPV, IRR, payback period, discounted payback, and profitability index.

4.Perform sensitivity analysesfor the following scenarios:

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?

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?