Description
FINANCE Case Study – Hola-Kola – up to 5 students per team (DUE: 04/16)
Anjelina Belakovskaia
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Students were randomly enrolled into 5-student teams on Canvas / People.
If you didn’t do it just yet – go to: https://hbsp.harvard.edu/import/1026855
Create an Account by clicking Register Now (click here for a how to guideLinks to an external site.)
Purchase each case/article/reading and start reading.
Communicate with the team.
Focus on Qualitative and Financial Analyses.
Use Excel for calculations.
Submit a 5-7 page Team report/analysis/recommendations AND your Excel file here. Due date – 04/16.
Also, each student should record a brief video and post it in the same thread.
QUALITATIVE ANALYSIS:
Factors and considerations that would support strategic investment in the new Hola-Kola product line.
Benefits, Risks, and uncertainties associated with such investment.
The arguments against investing in the new Hola-Kola product line.
FINANCIAL ANALYSIS:
What are the relevant cash flows in evaluating this project?
Use Excel to calculate:
NPV;
IRR;
Payback Period;
Discounted Payback Period;
Profitability Index.
Run the scenario analysis, with the following 3 scenarios:
Scenario 1 => The analysis you have already done.
Scenario 2 => You have been advised by the consultants that the energy costs, labor costs, and material costs are likely to rise by 5% a year, starting in Year 2. The consultants do not think that you can pass the extra cost through. What do you observe?
Scenario 3 => You have been advised by the consultants that the energy costs, labor costs, and material costs are likely to rise by 5% a year, starting in Year 2. The consultants think that you can pass the part of the extra cost through. You should be able to increase the price per unit by 5%, but the volume will decrease by 2%. What do you observe?
Valuations Comparison: Assign probabilities to each scenario (total 100%). How the shift in probabilities will impact your decision? What can you learn from the scenario analysis?
Consider sensitivity and breakeven analysis. Are they needed/important? Why or why not? What can you learn from them?
Conclusions: Should Bebida Sol invest in the new Hola-Kola product line? Please provide a supporting explanation.
SUGGESTED QUESTIONS:
Assess the numerous cash flows associated with this project and consider where and how they should be reported:
the consultant’s market study cost.
the potential rental value of the unoccupied annex.
the interest charges;
working capital.
Should the erosion of the existing product (the regular sodas) be considered in the analysis? Support your opinion.
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