Hola Kola
Project life	5	years
Bank loan	5	years
loan Annual intrest	16%
debt in capita	20%
equity in capital	80%
Weighted Average Cost Of Capital	18.20%
The estimated sales of Zero-Carbonates by the consultant per month	600,000	liters
price per liter	5	pesos
This volume of Sales at the same price till	5	years
Cost of the market study	5,000,000	pesos
Cost of the machines + installation	50,000,000	pesos
Depreciation in straight in next five years/per year	9,200,000	pesos
Cost of the Lease per year	60,000	pesos
Proposed number of inventory days	30
Proposed number of collection days	45
Proposed number of payable days	36
Working capital days	39
Raw material needed for each litre of Sodas	1.8	pesos
Labor Cost per month	180000	pesos
Energy Cost per month	50000	pesos
Incremental General + Administrative Expenses Per Year	300000	pesos
Overhead cost on new product launch	1%
Existing erosion	800,000
Existing Tax Rate	30%
Salvage Value	4,000,000

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

2. Perform sensitivity analysis on sales volume, price, direct labor, materials, and energy cost. What do you observe?

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

b. 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

c. 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%.

Capital Budgeting Analysis of Hola-Kola Monthly Sales (units) Increase (Decrease) in Sales Volume Unit Sale Price (pesos) Increase (Decrease) in Sales Price Unit Raw Material Cost (pesos) Increase (Decrease) in Raw Material Costs Monthly Labor Costs (pesos) Increase (Decrease) in Direct Labor Costs Montly Energy Costs (pesos) Increase (Decrease) in Energy Costs Cost of New Equipment (pesos) Resale Value of Equitpment (pesos) % Overhead to Sales Building Rental (pesos) Average Collection Period (Days) Average Payment Period (Days) Years of Strait-line Depreciation Cost of Capital Tax Rate Erosion (pesos) Year Cost of New Equipment (pesos) Resale Value of Equipment (pesos) 2 Resale Value of Equipment (pesos) Less Taxes Net Salvage Value of Equipment (pesos) Working Capital Requirements (pesos): Receivables((Sales/365)*Avg Collection Period) Inventories (One month materials costs) Payables ((Material Costs/365)* Avg Pmt Period) Net Working Capital CF due to Change in Working Capital (pesos) Annual Sales (Units) Annual Sales Revenue (pesos) Operating Expenses (pesos): Raw Material Costs Direct Labor Costs Energy Costs Building Rental(Opprtunity Costs) Depreciation Genreal Administrative and Selling Expenses Overhead Expenses Total Operating Expenses (pesos) EBIT (pesos) Taxes (pesos) Net operating Profit After Tax (pesos) Depreciation (pesos) Erosion of Existing Sales (pesos) Total Operating Cash Flow (pesos) Project's Free Cash Flow (pesos) Present Value of Free Cash Flow (pesos) Capital Budgeting Analysis of Hola-Kola Monthly Sales (units) Increase (Decrease) in Sales Volume Unit Sale Price (pesos) Increase (Decrease) in Sales Price Unit Raw Material Cost (pesos) Increase (Decrease) in Raw Material Costs Monthly Labor Costs (pesos) Increase (Decrease) in Direct Labor Costs Montly Energy Costs (pesos) Increase (Decrease) in Energy Costs Cost of New Equipment (pesos) Resale Value of Equitpment (pesos) % Overhead to Sales Building Rental (pesos) Average Collection Period (Days) Average Payment Period (Days) Years of Strait-line Depreciation Cost of Capital Tax Rate Erosion (pesos) Year Cost of New Equipment (pesos) Resale Value of Equipment (pesos) 2 Resale Value of Equipment (pesos) Less Taxes Net Salvage Value of Equipment (pesos) Working Capital Requirements (pesos): Receivables((Sales/365)*Avg Collection Period) Inventories (One month materials costs) Payables ((Material Costs/365)* Avg Pmt Period) Net Working Capital CF due to Change in Working Capital (pesos) Annual Sales (Units) Annual Sales Revenue (pesos) Operating Expenses (pesos): Raw Material Costs Direct Labor Costs Energy Costs Building Rental(Opprtunity Costs) Depreciation Genreal Administrative and Selling Expenses Overhead Expenses Total Operating Expenses (pesos) EBIT (pesos) Taxes (pesos) Net operating Profit After Tax (pesos) Depreciation (pesos) Erosion of Existing Sales (pesos) Total Operating Cash Flow (pesos) Project's Free Cash Flow (pesos) Present Value of Free Cash Flow (pesos)