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Posted on Jun 29, 2024

CAPITAL BUDGETING QUESTIONS: 1. What is the NPV for India? 2. What is the Present Value Index for India? 3. What is the IRR for

CAPITAL BUDGETING QUESTIONS:

1. What is the NPV for India?

2. What is the Present Value Index for India?

3. What is the IRR for India?

4. What is the net investment cost for India?

5. What is the profitability index for India? For Consistency Please Use: PI = 1 + (NPV/ Investment Cost)

6. What is the present value index for India?

7. Given limitation in capital available, should Fizzer pursue India project?

CAPITAL BUDGETING QUESTIONS:

1. What is the Present Value Index for Philippines?

2. What is the net investment cost for Philippines?

3. What is the IRR for Philippines?

4. What is the profitability index for Philippines? For Consistency Please Use: PI = 1 + (NPV/ Investment Cost)

5. Given limitation in capital available, should Fizzer pursue PH Project?

6. What is the NPV for Philippines?

CAPITAL BUDGETING QUESTIONS:

1. What is the net investment cost for Mexico?

2. What is the profitability index for Mexico? For Consistency Please Use: PI = 1 + (NPV/ Investment Cost)

3. What is the NPV for Mexico?

4. What is the IRR for Mexico?

5. Given limitation in capital available, should Fizzer pursue Mexico project?

CAPITAL BUDGETING QUESTIONS:

1. If WACC is 20%, which Country should Pfizer Pursue?

2. If WACC is 18%, which Country should Pfizer Pursue?

3. If the total available capital is at 100 Million, will the investment decision change?

4. If Fizzer decided to only pursue one project that maximizes the NPV, how much is the value created by this project?

5. If Fizzer have unlimited capital, will the decision as to which country to invest will change? Yes or No?

PS. THE QUESTION IS NOT INCOMPLETE

. Considering the riskiness of Philippines, WACC is estimated at 15% India (40% tax rate) . Fizzer will need to establish a new facility should the facility be established in India which would cost Fizzer the following: New machineries amounting to Php45,000,000 . Freight and installation cost at Php5,000,000 . The machineries to be installed in India have a production capacity of 1,500,000 vaccines per year in which the margin is expected to be at Php 12.50 per vaccine growing at 10% each year Operating expenses in India is expected to be lower compared to the Philippines such that it is estimated to be only at 15.0% of margin compared to the Philippines . Considering the riskiness of India, WACC is estimated at 12% Mexico (30% tax rate) . Fizzer will have to enter into a partnership agreement with a local vaccine manufacturer (AstroZenica) in which Fizzer will need to invest in Php20 million in cash and Php5 million in inventories while AstroZenica will invest in another Php25 million in cash. The partnership will then purchase the necessary machineries (amounting to Php45 million) needed to produce the vaccines, Fizzer and AstroZenica will share the free cash flow at 50%-50% based on their capital contributions into the partnership. The partnership is expected to be able to produce 1.000,000 vaccines per year in which the margin is expected to be at Php 14.00 per vaccine growing at 10% per year . Operating expenses in Mexico is expected to be at 10%% of margin and increasing by 1% per year (i.e.. 11% in year 2, 12% in year 3, 13% in year 4, and 14% in year 5) In response to the global health crisis. Mexico provides a 5-year tax break (0%% tax) to vaccine manufacturers plus an annual government subsidy of Php1.000,000 increasing by 10% every year (compounded) . Considering the riskiness of Mexico. WACC is estimated at 12%D Question 1 50 pts The Board of Directors of Fizzer Co. recently approved the allocation of up to Php60 million of capital to be invested in a vaccine manufacturing facility to address the immediate need for COVID-19 immunization. As of today, the management of Fizzer Co. is assessing the best place to establish its vaccine manufacturing facility in which Philippines, India and Mexico are currently being considered by the management. General background . COVID-19 is expected to last for a period of five-years from the time that vaccines are available and require highly specialized machines with no other use or resale value after the end of its useful life Philippines (30% tax rate) . Fizzer have an existing facility in the Philippines which will require significant modifications for it to meet the rigorous safety requirements for the production of COVID-19 vaccines such that: . Renovation costs is expected to be at Php10 million . New machineries amounting to Php50 million will need to be imported from China in which the Company expects to incur around Php5 million for the importation, testing and installation of the new machineries . Old machineries within the existing facility currently carried at Php25 million can be sold for Php40 million as these are well maintained . The machineries to be installed in the Philippines have a production capacity of 1 million vaccines per year in which the margin is expected to be at Php 10 per vaccine growing at Php1 per year . Operating expenses for the Philippines using the new machine is estimated at 20% of the Company's margin . Considering the riskiness of Philippines, WACC is estimated at 15%% India (40% tax rate)