What is the problem? Sensitivity Analysis What numbers impact the NPV?
- (Raw) material costs - labor costs
- Sales revenues
- Other operating expenses
- Capital Budgeting Analysis
How will this project contribute to the firm's value?
Which questions do we have to answer? 1) What are the relevant cash flows?
- Should we consider the erostion of the existing product?
- What are the NPV, IRR, payback, discounted payback and profitability index?
- Sensitivity analysis
- What are the benefits and risks for undertaking this project?
- Should Bebida Sol undertake this project? What are the relevant cash flows?
Conclusion
Should Bebida Sol commence this product?
Mexico
High rates of overweight/obesity due to high soft drink consumption Bebida Sol
Soft drink company in Mexico
Nola Kola
A no calory alternative soft drink
Erosion Costs?
NPV, IRR, Profability Index. Payback Period
Benefits and Risks
Benefits:
Increased market share for Bebida Sol
- Increased net Income