These two cases consider the capital venture choices to be made by administrators of this extensive chemicals firm in January 2001. The "A" case shows a go/no-go venture assessment with respect to changes to a polypropylene generation plant. The "B" case surveys the same venture however from one level higher, where the official faces an either/or speculation choice between two totally unrelated activities. The target of the two cases is to open students to an extensive variety of capital-planning issues which incorporates, among others, the recognizable proof of applicable money streams, the basic appraisal of a capital venture assessment framework, the fantastic "cross-over" issue, in which extend rankings differ on the premise of net present quality (NPV) and inside rate of return (IRR), and the evaluation of genuine choice worth inactive in administrative adaptability to change working advances.
· DCF Analysis of Merseyside Project(financial values in millions of British pounds)
· Payback period
· Depreciation Calculation
· Double declining used Yr 1-8
· Straight line used Yr 9-10
· Double declining used Yr 1-10
· Straight line used Yr 11-15
· Incremental Depreciation
1. What changes, if any, should Lucy Morris ask Frank Greystock to make in his discounted-cash-flow analysis? Why? What should Morris be prepared to say to the Transport Division, the Director of Sales, her assistant plant manager, and the analyst from the Treasury staff?
2. How attractive is the Merseyside project? By what criteria?
3. Should Morris continue to promote the project for funding?