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    Ecsy Cola Question2

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    Dhagash Sanghavi
    This document analyzes the net present value (NPV) of an investment over 4 years with an initial investment of $30 million that is written off over 4 years. It considers sales revenue, variable and fixed costs, depreciation, taxes, and cash flows to calculate the NPV. Running scenarios that reduce sales by 10%, 20%, 25%, and 29.2% show the impact on NPV. The analysis suggests that investing right away rather than waiting is better because the NPV is lower if starting earlier to potentially gain first mover advantage by establishing the brand.

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    © All Rights Reserved
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    Ecsy Cola Question2

    Uploaded by

    Dhagash Sanghavi
    56 views8 pages
    This document analyzes the net present value (NPV) of an investment over 4 years with an initial investment of $30 million that is written off over 4 years. It considers sales revenue, variable and fixed costs, depreciation, taxes, and cash flows to calculate the NPV. Running scenarios that reduce sales by 10%, 20%, 25%, and 29.2% show the impact on NPV. The analysis suggests that investing right away rather than waiting is better because the NPV is lower if starting earlier to potentially gain first mover advantage by establishing the brand.

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    ecsy cola question2

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    This document analyzes the net present value (NPV) of an investment over 4 years with an initial investment of $30 million that is written off over 4 years. It considers sales revenue, variable and fixed costs, depreciation, taxes, and cash flows to calculate the NPV. Running scenarios that reduce sales by 10%, 20%, 25%, and 29.2% show the impact on NPV. The analysis suggests that investing right away rather than waiting is better because the NPV is lower if starting earlier to potentially gain first mover advantage by establishing the brand.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    56 views8 pages

    Ecsy Cola Question2

    Uploaded by

    Dhagash Sanghavi
    This document analyzes the net present value (NPV) of an investment over 4 years with an initial investment of $30 million that is written off over 4 years. It considers sales revenue, variable and fixed costs, depreciation, taxes, and cash flows to calculate the NPV. Running scenarios that reduce sales by 10%, 20%, 25%, and 29.2% show the impact on NPV. The analysis suggests that investing right away rather than waiting is better because the NPV is lower if starting earlier to potentially gain first mover advantage by establishing the brand.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 8

    Initial investment 30000000 written off on SLM Basis for 4 years

    Dep tax to be added 1500000 per year


    Fixed costs 3000000 per year
    Variable costs 0.12 per litre
    Sales revenue 0.6 per litre
    Rate of return 20%
    Tax rate 30%
    Life of investment Perpetuity
    0 1 2 3
    Particulars 2018 2019 2020 2021
    Initial Investment (30,000,000.00)
    Litres sold 13,000,000.00 26,000,000.00
    Sales 7,800,000.00 15,600,000.00
    Fixed costs 3,000,000.00 3,000,000.00 3,000,000.00 3,000,000.00
    Variable costs 1,560,000.00 3,120,000.00
    EBITDA 3,240,000.00 9,480,000.00
    Depriciation 7,500,000.00 7,500,000.00 7,500,000.00
    (4,260,000.00) 1,980,000.00
    Tax 594,000.00
    Profit after tax (4,260,000.00) 1,386,000.00
    7,500,000.00 7,500,000.00 7,500,000.00
    Depriciation add back (3,000,000.00) 3,240,000.00 8,886,000.00

    Net cash flow (3,000,000.00) 3,240,000.00 8,886,000.00


    pv after cash flow (33,000,000.00) (2,500,000.00) 2,250,000.00 5,142,361.11
    17,456,597.22
    npv
    dep each year 7500000

    4 5
    2022 2023

    52,000,000.00 52,000,000.00
    31,200,000.00 31,200,000.00
    3,000,000.00 3,000,000.00
    6,240,000.00 6,240,000.00
    21,960,000.00 21,960,000.00
    7,500,000.00
    14,460,000.00 21,960,000.00
    4,338,000.00 6,588,000.00
    10,122,000.00 15,372,000.00
    7,500,000.00 -
    17,622,000.00 15,372,000.00
    76,860,000.00
    94,482,000.00
    45,564,236.11
    Initial investment 30000000 written off on SLM Basis for 4 years
    Dep tax to be added 1500000 per year
    Fixed costs 3000000 per year
    Variable costs 0.12 per litre
    Sales revenue 0.6 per litre
    Rate of return 20%
    Tax rate 30%
    Life of investment Perpetuity
    Sales revenue 1st yea 9214231.927711
    0 1 2 3
    Particulars 2,018.00 2,019.00 2,020.00 2,021.00
    Initial Investment (30,000,000.00)
    Litres sold 9,214,231.93 18,428,463.86
    Sales 5,528,539.16 11,057,078.31
    Fixed costs 3,000,000.00 3,000,000.00 3,000,000.00 3,000,000.00
    Variable costs 1,105,707.83 2,211,415.66
    EBITDA 1,422,831.33 5,845,662.65
    Depriciation 7,500,000.00 7,500,000.00 7,500,000.00
    (6,077,168.67) (1,654,337.35)
    Tax (496,301.20)
    Profit after tax (6,077,168.67) (1,158,036.14)
    7,500,000.00 7,500,000.00 7,500,000.00
    Depriciation add back (3,000,000.00) 1,422,831.33 6,341,963.86

    Net cash flow (3,000,000.00) 1,422,831.33 6,341,963.86


    pv after cash flow (33,000,000.00) (2,500,000.00) 988,077.31 3,670,117.97

    npv -

    If we want npv as zero the first year sales will be

    The business can sustain 29.12% sales drop


    7500000

    4 5
    2,022.00 2,023.00

    36,856,927.71 36,856,927.71
    22,114,156.63 22,114,156.63
    3,000,000.00 3,000,000.00
    4,422,831.33 4,422,831.33
    14,691,325.30 14,691,325.30
    7,500,000.00
    7,191,325.30 14,691,325.30
    2,157,397.59 4,407,397.59
    5,033,927.71 10,283,927.71
    7,500,000.00 -
    12,533,927.71 10,283,927.71
    51,419,638.55
    63,953,566.27
    30,841,804.72

    9214231.92771

    29.12%
    Scenario Summary
    Current Values: sales fall by 10% sales fall by 20%
    Changing Cells:
    $E$12 13,000,000.00 11,700,000.00 10,400,000.00
    $F$12 26,000,000.00 23,400,000.00 20,800,000.00
    $G$12 52,000,000.00 46,800,000.00 41,600,000.00
    $H$12 52,000,000.00 46,800,000.00 41,600,000.00
    Result Cells:
    $C$26 17,456,597.22 11,462,152.78 5,467,708.33
    Notes: Current Values column represents values of changing cells at
    time Scenario Summary Report was created. Changing cells for each
    scenario are highlighted in gray.
    sales drop by 25% sales drop by 29.2% sales drop by 30%

    9,750,000.00 9,214,321.00 9,100,000.00


    19,500,000.00 18,428,641.00 18,200,000.00
    39,000,000.00 36,857,284.00 36,400,000.00
    39,000,000.00 36,857,284.00 36,400,000.00

    2,470,486.11 410.53 (526,736.11)


    Initial investment 30000000 written off on SLM Basis for 4 years
    Dep tax to be added 1500000 per year
    Fixed costs 3000000 per year
    Variable costs 0.12 per litre
    Sales revenue 0.6 per litre
    Rate of return 20%
    Tax rate 30%
    Life of investment Perpetuity
    0 1 2 3
    Particulars 2018 2019 2020 2021
    Initial Investment (30,000,000.00)
    Litres sold 13,000,000.00
    Sales - 7,800,000.00
    Fixed costs 3,000,000.00 3,000,000.00 3,000,000.00
    Variable costs - 1,560,000.00
    EBITDA (33,000,000.00) (3,000,000.00) 3,240,000.00
    Depriciation 7,500,000.00 7,500,000.00
    (10,500,000.00) (4,260,000.00)
    Tax
    Profit after tax (10,500,000.00) (4,260,000.00)
    - 7,500,000.00 7,500,000.00
    Depriciation add back (33,000,000.00) (3,000,000.00) 3,240,000.00

    Net cash flow (33,000,000.00) (3,000,000.00) 3,240,000.00


    0.83 0.69 0.58
    pv after cash flow (27,500,000.00) (2,083,333.33) 1,875,000.00
    npv 14,547,164.35

    Libby realized tha investing right away is an better option because Npv is less here t
    dep each year 7500000

    4 5
    2022 2023 2024

    26,000,000.00 52,000,000.00 52,000,000.00


    15,600,000.00 31,200,000.00 31,200,000.00
    3,000,000.00 3,000,000.00 3,000,000.00
    3,120,000.00 6,240,000.00 6,240,000.00
    9,480,000.00 21,960,000.00 21,960,000.00
    7,500,000.00 7,500,000.00
    1,980,000.00 14,460,000.00 21,960,000.00
    594,000.00 4,338,000.00 6,588,000.00
    1,386,000.00 10,122,000.00 15,372,000.00
    7,500,000.00 7,500,000.00 -
    8,886,000.00 17,622,000.00 15,372,000.00

    8,886,000.00 17,622,000.00 15,372,000.00


    0.48 0.40
    4,285,300.93 7,081,886.57 30,888,310.19

    perp 76,860,000.00
    pv of per 30888310.1852

    ecause Npv is less here than starting 1y year earlier and establishing the brand could give first mover advantage

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