Case Analysis: Sangria Topochico – The Capital Budgeting Decision

Suggested Assignment Questions
1. What are the background of the investment environment and the soda market in Mexico?
2. What are the relevant cash flows?
3. Should we consider the erosion of the existing product- the regular sodas-in the analysis? Why or
why not?
4. Calculate the project’s NPV, IRR, and payback period.
5. Perform sensitivity analyses on sales volume, price, direct labor, materials, and energy cost. What
do you observe?
6. What are the benefits and risks of understanding this project?
7. Should Sangria Topochico undertake this project?

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