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    Hola Kola Case

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    Swaraj Dhar
    This document presents the capital budgeting analysis for a new soda product called HOLA KOLA. It projects revenues, costs, cash flows, and profitability over 5 years. Key details include: - Annual sales are projected to be 36 million liters generating total revenue of 72 million pesos per year. - Cost of goods sold and operating expenses are estimated to be 30.04 million pesos per year. - This would result in annual gross profit of 20.52 million pesos and net profit of 6.69 million pesos. - Total net cash flow over 5 years is estimated to be 154 million pesos with an IRR of 44% and payback period of

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    Hola Kola Case

    Uploaded by

    Swaraj Dhar
    4K views4 pages
    This document presents the capital budgeting analysis for a new soda product called HOLA KOLA. It projects revenues, costs, cash flows, and profitability over 5 years. Key details include: - Annual sales are projected to be 36 million liters generating total revenue of 72 million pesos per year. - Cost of goods sold and operating expenses are estimated to be 30.04 million pesos per year. - This would result in annual gross profit of 20.52 million pesos and net profit of 6.69 million pesos. - Total net cash flow over 5 years is estimated to be 154 million pesos with an IRR of 44% and payback period of

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    This document presents the capital budgeting analysis for a new soda product called HOLA KOLA. It projects revenues, costs, cash flows, and profitability over 5 years. Key details include: - Annual sales are projected to be 36 million liters generating total revenue of 72 million pesos per year. - Cost of goods sold and operating expenses are estimated to be 30.04 million pesos per year. - This would result in annual gross profit of 20.52 million pesos and net profit of 6.69 million pesos. - Total net cash flow over 5 years is estimated to be 154 million pesos with an IRR of 44% and payback period of

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    4K views4 pages

    Hola Kola Case

    Uploaded by

    Swaraj Dhar
    This document presents the capital budgeting analysis for a new soda product called HOLA KOLA. It projects revenues, costs, cash flows, and profitability over 5 years. Key details include: - Annual sales are projected to be 36 million liters generating total revenue of 72 million pesos per year. - Cost of goods sold and operating expenses are estimated to be 30.04 million pesos per year. - This would result in annual gross profit of 20.52 million pesos and net profit of 6.69 million pesos. - Total net cash flow over 5 years is estimated to be 154 million pesos with an IRR of 44% and payback period of

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    The case presents financial projections for a proposed Kola beverage business over 5 years, including sales, costs, profits, cash flows and capital budgeting metrics.

    Sales are projected to be 36 million per year, with total costs of around 30 million per year including raw materials, labor, overhead and depreciation. Profits are projected to be around 6 million per year. Cash flows are also projected annually over the 5 year period.

    Assumptions include: 600,000 liters sold per month at Rs. 5 per liter annually for 5 years. Raw material cost is Rs. 1.8 per liter. Labor cost is Rs. 1.8 lakhs per month. Inventory days are 30. Collection period is 45 days. Payment period is 36 days.

    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

    0
    0
    0
    0
    0
    0
    0

    0
    0
    0
    0

    Years
    2

    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)

    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 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

    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
    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

    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

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