The Board of Directors of Fizzer Co. recently approved the allocation of up to Php 60 Million of capital to be

invested in 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.

COVID-19 is expected to last for a period of 5 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 modification for it to meet the

rigorous safety requirements for the production of COVID-19 vaccines such that:

* Renovation cost is expected to be at Php 10 Million

* New Machineries amounting to 50 Million will need to be imported from China in which the Company expects

to incur around Php 5 Million for the importation, testing and installation of new machineries.

* Old machineries within the existing facility currently carried at php 25 Million can be sold for Php 40 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 Php 1 per year.

* Operating expenses for the Philippines using the new machine is estimated at 20% of the Company's margin.

* Considering the riskiness of the 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 cost Fizzer the following:

* New machineries amounting to Php 45 Million

* Freight and Installation Cost of Php 5 Million

* The machineries to be installed in India have a production capacity of 1,500,000 vaccines per year in which the marginis expected to be at Php 12.50 per vaciine growing at 10% per year

* Operating Expense in India is expected to be lowered 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 (AstroZeneca) in which Fizzer will need to invest Php 20 Million in cash and Php 5 Million in inventories while Astrozeneca will invest in another Php 25 Million in cash. Thepartnership will then purchase the necessary machineries (amounting to 45 Million) needed to produce the vaccines.

* Fizzer and Astrozeneca 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% 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 Php 1,000,000 increasing by 10% every year. (compounded)

* Considering the riskiness of Mexico, WACC is estimated at 12%

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?

OTHER 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 create