Analyze the case that is presented and answer what is requested to carry out the evaluation of projects:

 

Becle (José Cuervo), a company dedicated to the wine industry, producer, marketer and distiller of tequila and alcoholic beverages in the world, its a company in constant growth, which wishes to invest in a new project, for which it is necessary to carry out the evaluation of two projects that are presented to them before making a decision. Proposal 1 is the acquisition of a winery in Parras de la Fuente, Coahuila, to strengthen the expansion of the company, and proposal 2 is to expand one of its distilleries.

 

Proposal 1 - Acquisition:

The investment required for the project is $32,000,000.00, which would be by contribution, establishing a minimum acceptable rate of return of 30%, with an expected inflation of 6%.
It is estimated, according to the projection made, a demand of 25,000 units sold in the first year, with an increase of 15% for the next 2 years, 18% in years 4 and 5, and 22% in years 6. and 7. The unit price is $239.00 for the first 3 years and $249.00 for subsequent years. Variable costs are $106.00 and annual fixed costs are $26,000; the tax rate is 30%.

 

Proposal 2 - Extension:

The investment required for the project is $25,000,000.00, which would be by contribution, establishing a minimum acceptable rate of return of 25%, with an expected inflation of 5%.
A demand for the first year of 30,000 units sold is projected, with an increase of 12% for the next 3 years, 14% in the next 2 years, and 18% in the following year. The unit price is $336.00 for the first 3 years and $350.00 for subsequent years. Variable costs are $145.00 and annual fixed costs are $650,000; the tax rate is 30%.

1.- Determine the net cash flows.
2.- Perform the corresponding calculations to obtain the discount factor.
3.- Determine the discounted net cash flows for each period.
4.- Obtain the payback period with the above calculations.
5.- Obtain the net present value with the previous calculations.
6.- Calculate the profitability index of both projects.
7.- Calculate the internal rate of return for both projects.