Capital budgeting analysis o Before you build upon the analysis model in Excel, review the given case and reading materials carefully in which you should be able to find the case data needed and useful information for analysis. o Additional tips for preparing net working capital for the project:

Page 2 of 3 Accounts receivable is estimated as a percentage of annual sales of revenue, and the percentage is given by average collection period over 365 days in a fiscal year. Inventory level is estimated as a percentage of annual raw material costs, and the percentage is given by one month over 12 months in a fiscal year. Accounts payable is estimated as a percentage of annual raw material costs, and the percentage is given by average payment period over 365 days in a fiscal year. The additional net working capital needed for the project is required at the beginning of each year and will be released at the end of the project lifetime. o You must build upon a model for capital budgeting analysis in Excel by identifying key inputs, forecasting project cash flows, and calculating the project's NPV, IRR, MIRR, profitability index, and payback period. Use the spreadsheet set-up to convey the inputs and steps. Assume that an informed reader can review the model step by step and understand your results for decision rules. o Your analysis must be under three scenarios described as follows: Scenario 1: Perform a capital budgeting analysis with the information provided in the case. Scenario 2: You have been advised by the consultant that the energy cost, 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 pass the extra cost through sales. Scenario 3: You have been advised by the consultant that the energy cost, 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 costs through sales. You should be able to increase the price per unit by 5%, but the volume would decrease by 2%. o Perform the capital budgeting analysis in each scenario separately and summarize your project evaluation results in a scenario summary table as suggested in the template.

Page 3 of 3 (5) the erosion of the existing product? Are they considered as relevant cash flows? Why or why not? Describe your scenario analysis on sales volume, unit price, direct labor cost, materials cost, and energy cost and provide a scenario summary table that includes the changing key inputs and evaluation results. You must label and reference this table, as well as discuss your results for the decision rules. In your opinion what are the benefits and risks of undertaking this project? Finally, do you recommend the company to undertake this Hola-Kola project? Why or why not? o Do not define or explain finance concepts and measures, and treat your readers as informed and knowledgeable. o Interpret your results for their significance and meaning. Use your allocated pages wisely.