Diamond Chemicals Case Study

Diamond Chemicals: Case 21-22 TO: Lucy Morris FROM: DATE: September 30, 2009 SUBJECT: Merseyside Project In this memo I will be making a recommendation for or against the Merseyside Project. With the help of a few questions that send my memo, I will be able to determine whether or not to continue funding for the Merseyside Project. This memo will take an exhibit that will show an analysis of the Merseyside Project including the NPV and the IRR. In the DCF analysis that was provided in the case I have do a few changes to it and that will be presented later in my memo. First I will like to talk closely how Diamond Chemicals evaluate its majuscule expenditure proposals. Before submitting a project for approval, the leader of the project must determine what kinsfolk the project falls in. They have four possibilities and they are (1) immature product or market, (2) product or market extension, (3) engine room science efficiency, and (4) safety or environment. The Merseyside Project fell under form 3 which was engineering efficiency. With this project comes some concerns and that is why evaluating capital expenditure proposals can become such a complicate scheme. With Merseyside categorized as an engineering efficiency, it needs to meet a few requirements.

daze on Earnings per Share: This hail must be a autocratic for all engineering efficiency projects. This number calculates the average EPS contribution of the project everyplace its entire economic life. (Bruner,284) In Greystocks analysis it was positive and the number was at 0.018. Payback: The maximum payback effect for engineering efficiency projects stands at 6 years. Along with the Impact of Earnings per Share meeting the criteria, the payback period besides does. Greystocks analysis has the payback period at 3.6 years. Discounted exchange Flow: To determine this number you use the Present entertain of the Future Cash flows. Once you determine those numbers you subjoin them to determine the NPV of... If you want to get a full essay, ordering it on our website: Orderessay

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