Case ID: 280102
Solution ID: 6475
Words: 1680
Price $ 75

American Chemical Corp Case Solution

Case Solution

Dealing with the danger of changing costs of gold is fundamental to the business method of American Barrick Resources Corp., one of North America's biggest and best gold-mining firms. The case differentiates this current company's supporting approaches with those of its opponents that don't fence and points of interest the extensive variety of supporting items (gold advances, advances, choices, and spot conceded contracts) used to oversee value hazard. In 1992 the administration of American Barrick is wonderfully shocked by sudden new gold finds, yet this new creation spots requests on the company's supporting program and tests the company's dedication to supporting when costs of gold and of numerous supporting vehicles are ugly.

Excel Calculations

·         Cost of Capital

·         Cost of Equity                                                                                   

·         Beta Estimation (For figures of 1978 Alone)

                                                                                        

·         Cost of Debt      

·         Weighted Average Cost of Capital           

·         NPV Without Lamanite

·         Assumptions     

·         NPV Calculations (All Amounts in $000)                                                                                                                                 

·         ASSETS ( In $ 000)                                                                                            

·         NPV With Lamanite

·         Assumptions     

·         NPV Calculations (All Amounts in $000)                                                                                                                                 

·         ASSETS ( In $ 000)            

·         Forecasted Income Statement                                                                                                                                                 

·         Increase in Expenses after 1984 (Assumptions) 

Questions Covered

1.       Estimate the weighted average cost of capital appropriate for discounting the Collinsville plant's incremental cash flows.

 

2.       Project the incremental cash flows associated with the acquisition of the Collinsville plant without the laminate technology and estimate the acquisition's net present value.  Project the incremental cash flows associated with the 1980 investment in laminate technology and estimate the investment's net present value.

 

3.       Is the Collinsville proposal attractive on economic grounds?

 

4.       As CEO of Dixon Corporation, would you approve the acquisition of the Collinsville plant at the price and on the terms proposed?  Why, or why not?  What alternatives, if any, would you suggest?