Victoria Chemical Plc (A) Essay

684 Words Sep 18th, 2014 3 Pages

Ricky Tjayadi 01120120028
Young Jung Kim 01120120201
Irene 01120120214
The Background
Victoria Chemicals, a major company in the chemical industry, was the number one producer of polypropylene, a polymer used in various everyday items. Victoria Chemicals at the end of 2007 was in a financial slump and was under pressure to improve their financial performance. Due to this financial slump, Lucy Morris, the Plant Manager at Merseyside Works, proposed a GBP12 million project to help modernize the production line of polypropylene by remodeling and relocating tank-car unloading areas to streamline the process, refurbishing polymerization tanks to
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It will decrease the IRR. If we excluded the sunk cost, the IRR will decrease. Cost of tank cars should be included in the initial outlay of the Merseyside Works program, rather than in the book of transport division. Demand for the product is below VC is supplying. For the director of sales, transfer capacity away from Rotterdam toward Merseyside. Produce products at lower cost. Analyst from Treasury Staff. 10% hurdle rate excludes inflation rate. 3% inflation rate. So changed it into 7%, the discount rate. The IRR > 10% and NPV is positive.

2. How attractive is the Merseyside project? By what criteria?
This project is very attractive especially the EPS increase. EPS is one of the most sensitive factors for the investors. The increase in EPS of 0.022 doesn’t look that much but, given that the current number of outstanding shares is 92,891,240 and if we trace it back to the addition net profit, we get 2,043,607.28. Given that the estimated Gross profit for 2008 using current operation method is about 19.41 million dollars, the additional net profit is about occupying more than 10 percent of it. What is more, the 2 million dollars are promised every year not for certain period. Thus, considering the EPS increase, this project is attractive to the firm and the investors, too.

3. Should Morris continue to promote the project for funding?
Morris should continue

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