Liquid Chemical Company Case Study

2407 Words Jul 16th, 2006 10 Pages
Liquid Chemical Company

Executive Summary

Identifying all of the information relevant to a particular business decision is a challenging task because relevance is a broad concept. The process requires an understanding of quantitative and qualitative information, a grasp of legal issues, sensitivity to ethical concerns and an ability to discern fact from decision.

Virtually all business decisions involve choosing among alternative courses of action. The only information relevant to a decision is that which varies among the possible courses of action being considered. Costs, revenues, and other factors that do not vary among possible courses of action are not relevant to the decision.

In addition to quantitative information, many
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rhead (allocated, fixed?) 牋牋牋牋0 牋牋牋牋0 牋牋牋牋0 牋牋牋牋0 牋牋牋牋0 牋牋牋牋0

牋牋牋牋Relevant pre-tax expense 牋牋牋牋434,010 牋牋牋牋434,010 牋牋牋牋434,010 牋牋牋牋428,250 牋牋牋牋402,790 牋牋牋牋2,133,070

牋牋牋牋Tax credit (40% tax rate) 牋牋牋牋173,604 牋牋牋牋173,604 牋牋牋牋173,604 牋牋牋牋171,300 牋牋牋牋161,116 牋牋牋牋853,228

牋牋牋牋Relevant after tax expense 牋牋牋牋260,406 牋牋牋牋260,406 牋牋牋牋260,406 牋牋牋牋256,950 牋牋牋牋241,674 牋牋牋牋1,279,842

牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋

Adjustment to get to cash flow: 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋

牋牋牋牋GHL (sunk cost) 牋牋牋牋(51,000) 牋牋牋牋(51,000) 牋牋牋牋(51,000) 牋牋牋牋(51,000) 牋牋牋牋 牋牋牋牋

牋牋牋牋Other materials (running down inventory to zero) 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋(31,840) 牋牋牋牋

牋牋牋牋Depreciation (non-cash expense) 牋牋牋牋(38,220) 牋牋牋牋(38,220) 牋牋牋牋(38,220) 牋牋牋牋(32,460) 牋牋牋牋 牋牋牋牋

牋牋牋牋 牋牋牋牋171,186 牋牋牋牋171,186 牋牋牋牋171,186 牋牋牋牋173,490 牋牋牋牋209,834 牋牋牋牋896,882

牋牋牋牋Discount factor at 10% 牋牋牋牋1 牋牋牋牋1 牋牋牋牋1 牋牋牋牋1 牋牋牋牋1 牋牋牋牋

牋牋牋牋PV of annual cash flows 牋牋牋牋155,608 牋牋牋牋141,400 牋牋牋牋128,561 牋牋牋牋118,494 牋牋牋牋130,307 牋牋牋牋674,369

牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋

牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋

LIQUID CHEMICAL - ANALYSIS OF STRATEGIES IN RELATION 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋

牋牋牋牋TO PRODUCTION AND MAINTENANCE OF CONTAINERS 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋

Strategy - outsource both functions 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋Five Year

In pounds sterling 牋牋牋牋Year 1 牋牋牋牋Year 2 牋牋牋牋Year 3 牋牋牋牋Year 4 牋牋牋牋Year 5 牋牋牋牋Total

Expenses: 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋

牋牋牋牋Disposal of GHL: 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋 牋牋牋牋

牋牋牋牋 Revenue 牋牋牋牋(176,000) 牋牋牋牋 牋牋牋牋

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