Sangria Topochico $-$ The Capital Budgeting Decision

$1.$ What are the backgrounds of the investment environment and the soda market in Mexico?

$2.$ What are the relevant cash flows?

$3.$ Should we consider the erosion of the existing product$-$ the regular sodas$-$in the analysis? Why or

why not?

$4.$ Calculate the project$$s NPV$,$ IRR, and payback period.

$5.$ Perform sensitivity analyses and calculate the project$$s NPV$,$ IRR, and payback period if

a$.$ sales volume increases $4\mathrm{.}5\%$

b$.$ unit price increases $20\%$

c$.$ direct labor cost increases $5\%$

d$.$ raw materials increase $5\%$

e$.$ energy cost increases $5\%$

$6.$ What are the benefits and risks of undertaking this project?

$7.$ Should Sangria Topochico undertake this project?