Hola Kola Case

HOLA KOLA -THE CAPITA

Sales Revenue Unit Selling price Annual Sales (In Litres) 600000x 12 ( Volume) Total Revenue Less: COGS Raw Material cost@ 1.8 Pesos /liter X 600000 x12 Overhead Expenses@1% of Sales Direct Labor Cost@1,80,000 peros/month X 12

Gross Profit Operating Expenses Energy Cost@50,000 peros/month X 12 Building Rental (Oppourtunity Cost) General Administrative & Selling Expenses Less: depreciation

EBIT Less: Tax@30%

PAT Add:Depriciation

Total Operating Cash Flow (OCF) (Net Cash from Operating Activities) Less:Erosion

Net operating Cash after Erosion Investments (Machine with Installation Charges) Resale Value Receivables=(Sales/365) X Collection Period(45 Days) Inventories (One month raw material Cost) Payables=(Material cost /365) X Avg. Payment period(36 days) Net change in Working Capital requirement

Total Cash from CAPEX FCFF NPV@20% NPV@16% IRR Payback period

KOLA -THE CAPITAL BUDGETING DECISION 0

1

0 0 0 0 0 0 0

5

0 0 0 0

Years 2

3

7200000 36000000

5 7200000 36000000

5 7200000 36000000

(12960000) (360000) (2160000)

(12960000) (360000) (2160000)

(12960000) (360000) (2160000)

20520000

20520000

20520000

(600000) (60000) (300000) (10000000)

(600000) (60000) (300000) (10000000)

(600000) (60000) (300000) (10000000)

0

9560000 2868000

9560000 2868000

9560000 2868000

0 0

6692000 10000000

6692000 10000000

6692000 10000000

0 0

16692000 (800000)

16692000 (800000)

16692000 (800000)

15892000

15892000

15892000

(50,000,000)

0

0

0

0 0 4438356.16438356 4438356.164 4438356.16438 1080000 1080000 1080000 1080000 0 (1278247) (1278247) (1278247) 1080000 4240109.5890411 4240109.589 4240109.58904 (47,840,000)

8,480,219

8,480,219

8,480,219

(47,840,000) $28,262,875.13 $35,770,706.70 44% 1.96

24,372,219

24,372,219

24,372,219

4

5

5 7200000 36000000

5 7200000 36000000

(12960000) (360000) (2160000)

(12960000) (360000) (2160000)

20520000

20520000

(600000) (60000) (300000) (10000000)

(600000) (60000) (300000) (10000000)

9560000 2868000

9560000 2868000

6692000 10000000

6692000 10000000

16692000 (800000)

16692000 (800000)

15892000

15892000

0

0 4000000

4438356.164 4438356.16438 1080000 1080000 (1278247) (1278247) 4240109.589 8240109.58904

0 1 2

CF BALANCE (47,840,000) (47,840,000) 24,372,219 (23,467,781) 24,372,219 904,438

8,480,219

16,480,219

3

24,372,219

25,276,658

24,372,219

32,372,219

4 24,372,219 5 104,372,219

49,648,877 154,021,096 1.962890603

Given Data in the case Tenor of the loan to be given by the banker=5 Years Annual Interest Of The Term Loan=16% Weight of debt in capital structure=20% Weight of equity in capital structure=80% Weighted Average Cost Of Capital=18.20% The estimated sales of Zero-Carbonates by the consultant per month=600,000 Litres The projected price per litre=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 including installation=50,000,000 Pesos Depreciation in straight in next five years, per year depreciation=10,000,000 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 to produce each liter of Sodas=1.8 Pesos Labor Cost per month=180000 Pesos Energy Cost per month=50000 Pesos Selling & Administrative Expenses=300000 Pesos Overhead cost on new product launch=1% of Sales