I already did my own spread sheet  about victoria chemicals A case, I need to build my report based on descreption of the 3 scenarios and the base cas, no history.

hi

I already did my own spread sheet  about victoria chemicals A case, I need to build my report based on descreption of the 3 scenarios and the base cas, no history. start with:

In this case study we analyzed three risk factors that can potentially impact the valuation of the the project.

Base case looked that there are or consist of……… …

The first one is………………

The second risk factor we analyzed was………..

The last risk factor that was analyzed was…………..

 

Executive Summary:

Victoria Chemicals is a leading producer of polypropylene, a polymer used in a wide variety of products. Their factory at Merseyside consists of old production only semi continuous, causing the factory to have higher labor content.  In order to remain relevant and profitable in such a competitive market, Victoria Chemicals needs to update its antiquated plant design.

When Lucy Morris took over her position as plant manager, she discovered many opportunities to improve the polypropylene production. Some improvement stem from deferring maintenance over the preceding five years. Capital expenditures by the company only consisted of the most essential. Now what was deferred is going to be essential.  By making improvements, it would save energy and improve process flow. Included in the improvements would be:

1.         Relocating and modernizing tank-car unloading areas, which would enable process flow to be streamlined.

2.         Refurbishing the polymerization tank to achieve higher pressures and thus greater output.

3.         Renovating the compounding plant to increase extrusion throughput and obtain energy savings.

The improvements are proposed to be GPB12 million by plant manager Lucy Morris. The disadvantages to this proposal would be that the plant would be shut down for 45 days, thus running the risk of losing customers.  The advantages would be lower energy requirements and 7% greater manufacturing throughput.  Also, the project is expected to improve the gross margin from 11.5% to 12.5%.

The proposed project has objections by different divisions of Victoria Chemicals.  The first division that is concerned is the Transport Division.  They could increase their allocation of tank cars to Merseyside, but with the anticipated growth of the firm, they believe they will have to purchase new tank cars.

The second division with concerns is with the sales and marketing departments.  They point out that although the project assumes Victoria Chemicals can sell the added output they are predicting, can they actually sell it?  The market for polypropylene is extremely competitive, and the industry is in a downturn.  They think that this will cause cannibalization within the company.

The third objection is by the Assistant Plant Manager Griffin Tewitt.  He has been engrossed in renovating the ethylene-propylene-copolymer rubber (EPC) part of the plant.  His project would give Victoria Chemicals the lowest EPC cost base in the world, but his NPV for the project was (GBP750,000).  He believes his project should be included in the renovations.

The final objections are by the treasury staffs who believe that because of inflation the discount rate should be 7% instead of 10%.  This is ignored in the analysis, and 10% is continued to be used.

Problem Statement:

Will undertaking the capital program to improve productions at Merseyside improve the financial performance of Victoria Chemicals?  Will taking on this project cause a loss of business volume?