The price per litre and the distance between and store

Table of Contents

1) Distribution Centres (DCs)........................................................................................................ 3

2) Into-Store Transport…...............................................................................................................3

6. Sensitivity analysis of financial model………….………………………………………………..6

2.6.1 Base case……………………………………………………………………………………7

3. Introduction……………………………………………………………………………………….7

4.1 Benefit of florescent light bulb……………………………………………………………………8

Part Ⅰ

1. Introduction

• The full costs for WOW in FY13 on a per carton basis

• The analysis of rebate per carton, EBIT, the hurdle rate, NPV

2.2 Total incremental costs:

Table Two

Secondly the only variable cost attached to Into-stores is the fuel. The current truck utilisation is 90%, it means 10% of the capacity of truck (3.6 pallets) can be used to carry DCs beer and an additional pallet requires 0.01litre/km. The price per litre is $1.40 and the distance between DC and store is 40km. Therefore variable cost can be calculated as follow: The value of cost deliver = (the carton volume/70 carton)/ 3.6 pallet * 0.01litre/km * $1.40/litre * 40km. Moreover, there is no incremental fixed cost with Into-Store Transport.

3) Stores

2.4 Full costs for WOW in FY13 on a per carton basis:

Table four

The capital expenditure includes forklifts costs of $2.25 million IT costs of $300k, project team costs of $150k and legal costs of $100k at the end of the year 2012 before the conversion of new project. Additionally, working capital for inventory is also included in cash expenditure costs of $33.2 million. Therefore the total amount of Capex is $35.96 million for year 2012.

With the increase in DSD beer volume new forklifts needs to be purchased every year. Also the inflation rate of 3% per year is considered, hence all costs and the rebate would increase by 3% from FY13 to FY17. Furthermore, working capital for inventory is calculated. For example, net working capital in FY13 is the difference between the total amount of working capital in FY12 and FY13. At the end of table, tax shields have been calculated for IT and forklifts. Then using the Goal Seek function rebate per carton is populated for IRR = 12.50% and NPV = 0. This results in rebate per carton to $0.2142 for FY13. Similarly in order to achieve EBIT of $22 million for GY15 the rebate per carton for FY13 is $0.5798.

The base case has been analysed with the information provided by Table six. The NPV of the base case is 0. It indicates that IRR is 12.5%.

2.6.2 Scenario One

By comparing the above two scenarios with base case, both of the scenarios are better than base case. It is obvious that scenario two have higher NPV and IRR than the scenario one. Therefore the change of rebate and cost growth is the most sensitive variables in this financial model.

Part Ⅱ

4.1 Benefit of LED light bulb.

During the marketing research, the primary focus was on measuring the long term benefit of changing all the lighting to LED bulbs in the FY13. Figure 1 compares the Philips luxspace compact power 45W with the currently used 100W metal halides bulb on the following aspects: unit price, KW/Hr, electricity bill per year, CO2 emission and carbon tax.

By investing in this project will result in huge savings in terms of 1) purchasing new bulbs as LED lifespan is 7 times more than the conventional bulb, 2) reduction in consumption of electricity hence decrease in electricity bill per year, 3) lower carbon emission there by contributing less pollution to the environment and 4) savings in carbon tax. As it is evident from the figure 3 that investment in this project will result into positive NPV at a hurdle rate of 12.5% and IRR of 13.5%.

FIGURE 3

http://www.woolworthslimited.com.au/phoenix.zhtml?c=144044&p=irol-reportsannual

2) Philips, viewed on 02/05/2012, http://www.lighting.philips.com/main/projects/tamworth_atrium.wpd