Essays /

Victoria Chemicals Essay

Essay preview

Case #22
Victoria Chemicals

Synopsis and Objectives

go/no-go decision

1. The identification of relevant cash flows; in particular, the treatment of:
a. sunk costs
b. cash flows obtained by cannibalizing another activity within the firm
c. exploitation of excess transportation capacity
d. corporate overhead allocations
e. cash flows of unrelated projects
f. inflation.
2. The critical assessment of a capital-investment evaluation system.
3. The treatment of conflicts of interest and other ethical dilemmas that may arise in investment decisions.

Suggested Questions

1. What changes, if any, should Lucy Morris ask Frank Greystock to make in his discounted cash flow (DCF) 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?

Case B:
1. Why are the Merseyside and Rotterdam projects mutually exclusive...

Read more


0.1 000 1 10 12 13 15 17.1 1st 2 22 22.3 3 3.5 31.0 4 4.5 5 6 8.8 accept accompani across activ adjust advoc affect alloc allow also although analys analysi analyst analyz anoth anticip appear aris ask assess assist associ assum assumpt attract averag b base basi believ benefit board busi c calcul camperdown cannib capac capit capital-invest car case cash chang chemic chief come compani compar competitor complet complic compris concern conflict consid consider contain continu corpor cost criteria criterion critic d dcf decis decreas depreci differ dilemma director discount discuss divis e earlier econom elizabeth energi engin enhanc ep eros error essenti ethic eustanc evalu excerpt excess exclud exclus execut exhibit expenditur exploit f faster fawn final financi find firm five flexibl flow follow four frank fund gbp10 gbp500 go/no-go greystock happi hedg herein high howev identif impact import improv includ increas indecis industri inflat input interest invest irr irrelev jame john keep last line luci m made main major make manag manageri may mean member memo merseysid might million minim modern month morri mutual necessari nomin npv object obtain occur offic one oper origin outcom overhead overhead/investment part particular pass payback pbp per period plant polypropylen possibl prepar previous price process product profit project promot propos quantifi question rate rather rational real reanalyz recalcul recommend reflect regard relev remain request respect respond result return risk rotterdam sale save say shield staff still strateg studi style subject suggest summar summari sunk suscept synopsi system systemat take tank tank-car tax team time took top transport treasuri treatment tri two undertaken unrel updat upgrad use valu victoria victorian way within worldwid would year