Hola Kola Case Solution

Hola Cola case (in millions os dollars) Year 0 Revenues COGS Gross profit Depreciation SG&A expense Labor & energy Fixed costs OC EBIT 1-T NOPAT Depreciation OCF Receivables Payables Inventory Working Capital Change in working capital Capex Cannibalization FCF NPV IRR Payback period

Year 1 0 0 0 0 0 0 0 0 0 0 0 0 0 4.5 -1.332 1.08 4.248 -4.248 -50 0 -54.248

36 -13.32 22.68 -10 -0.3 -2.76 -3.06 -0.06 9.56 0.7 6.692 -10 16.692 4.5 -1.332 1.08 4.248 0 0 -0.8 15.892

($1.7205313) 16.8555% 3.4135 (3 yrs and 5 months approx.)

Sensitivity analysis NPV Sales volume

($1.7205313) 0.4 0.41 0.42 0.43 0.44 0.45 0.46 0.47 0.48 0.49 0.5

0.51 0.52 0.53 0.54 0.55 0.56 0.57 0.58 0.59 0.6 0.61 0.62 0.63 0.64 0.65 0.66 0.67 0.68 0.69 0.7 0.71 0.72 0.73 0.74 0.75 0.76 0.77 0.78 0.79 0.8 NPV is 0 when sales is

$

0.6132

Year 2

Year 3 36 -13.32 22.68 -10 -0.3 -2.76 -3.06 -0.06 9.56 0.7 6.692 -10 16.692 4.5 -1.332 1.08 4.248 0 0 -0.8 15.892

Year 4 36 -13.32 22.68 -10 -0.3 -2.76 -3.06 -0.06 9.56 0.7 6.692 -10 16.692 4.5 -1.332 1.08 4.248 0 0 -0.8 15.892

s and 5 months approx.)

NPV Price

### 2 2.2 2.4 2.6 2.8 3 3.2 3.4 3.6 3.8 4

36 -13.32 22.68 -10 -0.3 -2.76 -3.06 -0.06 9.56 0.7 6.692 -10 16.692 4.5 -1.332 1.08 4.248 0 0 -0.8 15.892

4.2 4.4 4.6 4.8 5 5.2 5.4 5.6 5.8 6 6.2 6.4 6.6 6.8 7 7.2 7.4 7.6 7.8 8 NPV is 0 when price is

$

5.1097

Year 5 36 -13.32 22.68 -10 -0.3 -2.76 -3.06 -0.06 9.56 0.7 6.692 -10 16.692 0 0 0 0 4.248 2.8 -0.8 22.94

### 0.2 0.25 0.3 0.35 0.4 0.45 0.5 0.55 0.6 0.65 0.7

30%

Receivables Payables

4.5 1.11

wacc

NPV Cannibalization

Tax

18.2%

0.75 0.8 0.85 0.9 0.95 1 1.05 1.1 1.15 1.2 1.25 1.3 1.35 1.4 1.45 1.5 1.55 1.6 1.65 1.7 NPV is 0 when cannibalization is

$

0.2473

Sales volume Price Cannibalization Raw materials OH costs COGS

0.6 5 0.8 12.96 0.36 13.32