Question
can someone please answer the Hola Kola case? Hola Kola Case: Analytical guideline: 1. In your review and analysis of the Hola-Kola case, in addition
can someone please answer the Hola Kola case?
Hola Kola Case: Analytical guideline: 1. In your review and analysis of the Hola-Kola case, in addition to your own questions and issues, you should also consider the following questions. 2. In evaluating a potential investment project, the first thing is to examine the investment environment of the company? What do you think about the soda market in Mexico? What would be the potential risks and benefits of this investment to Hola-Kola? What are the key factors that could potentially affect the related cash flows and ultimately, the NPV? 3. What are the relevant cash flows? Note: Define working capital requirement as: Receivables [(Sales/365)* average collection period] + Inventories [One month material costs] - Payables [(Material costs/365)*average payment period) 4. Based on your projections of cash flows, compute a net present value (NPV) and internal rate of return (IRR). 5. What is the breakeven point in sales that makes NPV equal to zero? Restore the value of sales after using the Goal seek function 6. In addition to the above base case analysis, now conduct a scenario analysis based on the following two conditions. a) Scenario 1: the consultants advised that the energy costs, the labor costs, and the material costs are likely to rise by 5% a year, starting in Year 2. Assume that the company cannot pass the extra cost through to the customer, i.e. the company could not increase the price. b) Scenario 2: the consultants advised that the energy costs, the labor costs, and the material costs are likely to rise by 5% a year, starting in Year 2. Assume that the company can pass the extra cost through by increasing the price per unit by 5%. However, this would lead to a 2% drop in sales volume. What do you observe comparing these two scenarios to the base case? 7. Based on your projections, would you recommend the company to invest in this project? Explain why.
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