Diamond Chemicals

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Diamond Chemicals: Merseyside and Rotterdam Projects [pic] Group 5 Edi Suryanto Gressiadi Muslim M Fahmiansyah Rudianto Nugroho Wibowo Kristianto MAGISTER OF BUSINESS ADMINISTRATION FACULTY OF ECONOMICS AND BUSINESS GADJAH MADA UNIVERSITY 2011 Diamond Chemicals: Merseyside and Rotterdam Projects Diamond Chemicals is a leading producer of polypropylene, the polymer used in a variety of products (ranging from medical products to packaging film, carpet fibers, and automotive components) and is known for its strength and elasticity. Diamond Chemicals is producing polypropylene at Merseyside, England and in Rotterdam, the Netherlands. Both factories are identical in size, age, and plant design.…show more content…
Currently, the average price of polypropylene is 541 Euros per ton for Diamond Chemicals product mix. The tax rate required in the analysis of capital expenditure is 30%. Diamond Chemicals has received tank cars Merseyside Propylene from four oil refineries in Britain. Because the project has increased, transportation should improve the allocation of tank cars to Merseyside. Tewitt Griffin, assistant plant manager and direct reports from the Morris proposed the renovation of EPC production line at a cost of £ 1 million; however, the executive committee had rejected the project, mainly for economic reasons. Andrew Cowan assume long-term inflation rate expected is 3 percent per year. Thus, the real target rate of return of Diamond Chemical (with, zero inflation) is 7 percent. Greystock decided to continue using the discount rate by 10 percent, because it is promoted in the latest issue of capital budgeting manuals Diamond Chemicals. In accordance with the analysis Greystock, Merseyside project meets all four investment criteria: 1. Additional average annual EPS = 0.018 pounds 2. Payback Period = 3.6 years 3. NPV = £ 9.0 million 4. IRR = 25.9 percent Diamond Chemical PLC (B): Plan Rotterdam Proposals from Elisabeth Eustace consists of 90 full-page documents with the detailed scheme or chart, comments from engineers, strategic analysis, and financial plan. Based on the analysis of Discounted-Cash-Flow (DCF) and indicated that the plan has a NPV of £ 14

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