Diamond Chemicals

The purpose is to assess the likelihood of a particular solution option's achieving the benefits outlined in the Business Case. The Feasibility Study will also investigate whether the forecast costs are reasonable, the solution is achievable, the risks are acceptable and/or any likely issues are avoidable.

The business plan is intended solely for informational purposes to assist you with a due-diligence investigation of this project. The information contained herein is believed to be reliable, but the management team makes no representations or warranties with respect to this information. The financial projects that are part of this plan represent estimates based on extensive research and on assumptions considered reasonable, but they are of course, not guaranteed. The contents of this plan are confidential and are not to be reproduced without express written consent.

With the fact the Diamonds are made by the rock cycle then it affects where we can find them. We can see this from the fact that certain areas in the world have certain attributes that let diamonds be able to form. Crain found that diamonds may be spat out in the volcanic smoke that is released during an eruption. We can find them with the gravel that came out as well with the volcanic

* Diamond is the strongest natural mineral known by a man. It is a crystalline form of carbon.

Also, there are some concerns that if Merseyside would undergo renovations and is able to produce polypropylene cheaper than our sister plant at Rotterdam, then cannibalization would occur. We are not so sure that since we are in different geographical locations and service different areas that cannibalization would occur. But, if a problem would arise and cannibalization is suspected, Victoria Chemicals can enact a price averaging policy for both plants. Although Merseyside may be able to produce and sell polypropylene cheaper than Rotterdam if we average the sales price and have both plants sell at the same price it would alleviate this issue.

The diamond cartel has been in existence for over a hundred years. (Spar: 2006) It has faced many issues in order to survive and prosper. (Kretschmer: 1998) Rhodes’ method was sufficient during the early 1900s. (Spar:2006) By 1930, the price of diamonds had fallen and the war was looming; Europeans were not interested in buying diamonds. (Epstein: 1982) It changed ownership to the Oppenheimers around about the Great Depression. Thus began the exploitive marketing tactics of the 20th century. (Epstein: 1982)

The investment requested is £12 million. Strategic and operating benefits were summarized in our previous memo to you. We have made, however, some changes to our investment analyses, which appear below.

The Merseyside project clearly provides a superior return to the Rotterdam project based on the profit, cash flow and payback criteria. In addition, the positive net

Overall, we have decided that the Merseyside project should be accepted based on the achievement of Diamond Chemicals decision criteria. The project produces a positive NPV of €6.07, holds an IRR greater than their cost of capital at 21.4%, has a payback period less than 6 years at 5.71 years, and adds to earnings per share by generating an extra £.0203 per share. This project satisfies all 4 decision criteria requirements, making Morris’s choice easy in deciding to continue funding the project. Lucy Morris and Diamond Chemicals should go forward with the Merseyside project.

The company owns two plants in Europe, one being Merseyside Works, England and Rotterdam Facility, Holland. Both plants were built in 1967 and are identical in scale and design. James Fawn, the Vice President and Manager of Intermediate Chemicals Group, is in charge of both plants.

The discount rate is a means of calculating a value now of benefits that occur in the future. The discount rate recognizes the time value of money. A four percent real discount rate is used in the calculations. However, the high-speed train project would be economically feasible even under the higher discount rates used by some public agencies and economists. The Internal Rate of Return (IRR) is an evaluation measure that is

In this memo I will be making a recommendation for or against the Merseyside Project. With the help of a few questions that guide my memo, I will be able to determine whether or not to continue funding for the Merseyside Project. This memo will include an exhibit that will show an analysis of the Merseyside Project including the NPV and the IRR. In the DCF analysis that was provided in the case I have made a few changes to it and that will be presented later in my memo. First I will like to talk about how Diamond Chemicals evaluate its capital expenditure proposals.

As a world wide major competitor in the chemical industry, Victoria Chemicals is a leading producer of polypropylene, a polymer that is used in a variety of products around the globe. Polypropylene is known for its strength and malleability and was priced as a commodity. The company operates two plants that produce polypropylene, one at Merseyside, England and the other at Rotterdam, Holland. Both plants were identical in scale, design, and age. However, Morris Greystock, the manager for the Merseyside plant saw a decline in the company’s stock, and decided to improve the position of the company. To do that, she came up with a project to increase production efficiency, rationalize the

Do you endorse Eustace’s analysis of the project at Rotterdam? How would you improve on it?

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