Diamond Chemicals

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Diamond Chemicals PLC Executive Summary

Diamond Chemicals is considering two mutually exclusive projects, the Merseyside project and the Rotterdam project, for the production of polypropylene

When considering the Merseyside project, senior-management wants a positive impact on earnings per share. The addition to earnings per share was £28,800 with an average addition of £2,000 per year2. Calculated with erosion, the addition to earnings per share was £18,800 with an average addition of £1,100 per year2. The payback period for the project was 3.10 years, when considering the erosion of Rotterdam, this would increase to 3.46 years2. The net present value of Merseyside is £15.61 million and when considering erosion, the net present
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• Refurbishing the polymerization tank to achieve higher pressures and thus greater throughput. • Renovating the compounding plant to increase extrusion throughput and obtain energy savings.
Bruner: Case Studies in Finance

The project would have an initial outlay of £9 million and will require the entire line to be shut down for 45 days. This project would lower energy requirements and have a 7% greater manufacturing throughput. Also, it is expected to improve its growth margin to 12.5%.
Bruner: Case Studies in Finance

Concerns at Merseyside:
There are also some concerns that have been brought to our attention from different divisions of Diamond Chemicals. They include:

Concerns of the Transport Division:
Concerns coming from the Transport Division were those of the increased capacity that they would receive as a result of the Merseyside project. This project would increase the allocation of tank cars to Merseyside. To realize this expansion, the Transport Division would need to purchase a new rolling stock. This purchase would cost £2.0 million. As stated earlier, Greystock has left this portion out of his Discounted Cash Flow analysis, stating that

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