Victoria Chemicals

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CASE 1 - A CASE STUDY OF VICTORIA CHEMICALS Corporate Finance (FEG304) Table of Contents 1.0) Introduction This report contains two case studies in the discourse of Corporate Finance, more specifically capital investment strategy. The cases are applied on the fictional company Victoria Chemicals and are divided into (A): “The Merseyside Project and Victoria Chemicals” and (B): “The Merseyside and Rotterdam project”. The cases are picked from the book “Case Studies in Finance – managing for Corporate Value Creation” written by Robert. F. Bruner. 1.1) Background Victoria Chemicals is a fiction company that processes polypropylene. The company is in fact even a leading producer of the substance,…show more content…
Another way that inflation can arise is if people want to buy more goods and services than the companies can produce. Yet another is if the costs of producing the goods and services increase. This may be because wages have risen, for instance. The companies may then need to raise their prices as compensation for rising production costs. But inflation can also arise if companies and households believe that everything will become more expensive. 2 Cannibalization Cannibalization is the negative effect of a company’s new launched product on the sales performance of its existing related product. It refers to that the new product replaces the demand of another product. The sales of the already existing product will get lower instead of expanding the company´s market base. (Berk & DeMarzo, 2014) Internal Rate of Return – IRR The internal rate of return (IRR) is a rate of return used in capital budgeting to measure and compare the profitability of investments. Generally speaking, the higher a project 's internal rate of return is, the more desirable it’s to undertake the project. As such, IRR can be used to rank several prospective projects a firm is considering. The project with the highest IRR would probably be considered the best and undertaken first. IRR is sometimes referred to as economic rate of return (ERR) or simply the rate of return (ROR). In theory should companies undertake all projects or investments available with IRRs that exceed the cost of capital.

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