VICTORIA CHEMICALS plc (A)
Presented by Group 2 :
Aldy Rifianto, Dedy Mardianto
Floriana Nataly, Hiralalitya
Lextro Kristiano Concorda
Natallia Winata, Wita Puspadilla
Yosua Bangun
THE MERSEYSIDE PROJECT
SUMMARY
PROBLEM IDENTIFICATION
ALTERNATIVE SOLUTION
RECOMENDATION
SUMMARY
• Victoria Chemicals, a major competitor in the
Worldwide chemicals industry, was a leading
producer of polypropylene, a polymer used in
an extremely wide variety of products
SUMMARY
Victoria Chemicals was under
pressure from investors to
improve
its
financial
performance because of the
accumulation of the firm’s
common shares by a well
known corporate raider. The
Earnings was fallen to 180
pence per share at the end of
2007 from around 250 pence
per share at the end of 2006.
SUMMARY
Lucy Morris was plant Manager of
Victoria Chemicals Merseyside Works
in Liverpool, England. Her Controller
Frank Greystock was discussing a
capital project that Morris wanted to
propose to senior management. The
Project Consisted of a (British
Pounds) GBP 12 Million expenditure
to renovate and rationalize the
polypropylene production line at the
Merseyside plant in order to make up
for deferred maintenance and to
exploit opportunities to achieve
increased production efficiency.
SUMMARY
• Beside The Polypropylene plant at Merseyside
also has Etylene Propylene Copolymer rubber
(EPC).
• EPC remainded a relatively small product in the
European chemical Industry.
• Victoria, the Largest supplier of EPC, Produced
the entire volume at Merseyside.
• EPC had been only marginally profitable to
Victoria because of the entry by compatitors and
the development of competing synthetic-rubber
compounds over the past five years
SUMMARY
•
•
•
•
The Merseyside project
would be in the
engineering-efficiency
category :
Impact on earning per share
= had to be positive.
Payback = maximum six
years.
Discounted cash flow = had
to be positive.
Internal rate of return had
to be greater than 10%.
PROBLEM INDENTIFICATION
• Victoria
Chemicals
must
improve
its
Financial
Performance and raise the
Earnings per share
• The Merseyside Production
process was constructed in
1967.
• The Price of Polypropylene
very competitive
• There is 7 Major Competitors
manufactured polypropylene
with various cost Level.
PROBLEM INDENTIFICATION
Company
CBTG A.G
Victoria Chem.
Victoria Chem.
Hosche A.G
Montecassino SpA
Saone-Poulet S.A
Vaysol S.A
Next 10 Largest Plants
Plant
Built In
Location
Saarbrun
Liverpool
Rotterdam
Hamburg
Genoa
Merseille
Antwerp
1981
1967
1967
1977
1961
1972
1976
Production
Plant Annual
Cost per Ton
output
(indexed to low
(metric tons)
cost producer)
350.000
250.000
250.000
300.000
120.000
175.000
220.000
450.000
1,00
1,09
1,09
1,02
1,11
1,07
1,06
1,19
PROBLEM INDENTIFICATION
• The Director of sales analysis that the industry
of Polypropylene is in a downturn and it
lookslike a oversupply is in the works. This
means that we will probably have to shift
capacity away from Rotterdam toward
Merseyside in order to move the added
volume. Is this a really a gain for Victoria
Chemicals? Why spend money just so one
plant can cannibalize another?
PROBLEM INDENTIFICATION
• EPC Plant at Meyerside also need to
renovation to keep produce the Etylene
Propylene Copolymer.
• If EPC Project calculate seperately from
Polypropylene Project it was negative NPV and
the company ignore it.
• If EPC Plant never do Renovation, Victoria
Company will have to exit the EPC business
during in 3 years.
ALTERNATIF SOLUTION
The Proposed Capital Program
• Morris proposed an expenditure of GBP 12
Million on this Program.
• The Entire Polymerization line would need to
be shut down for 45 days.
• Will Loss the customer during shut down can
not supply to customer.
• greystock.xlsx
ALTERNATIVE SOLUTION
• The Condition of Calculation was :
Assumptions :
Annual Output (metric tons)
Output Gain/Original Output
Price/ton (pounds sterling)
Inflation Rate (prices and costs)
Gross Margin (ex. Deprec.)
Old Gross Margin
Tax Rate
Energy Savings/Sales
Yr. 1-5
Yr. 6-10
Yr. 11-15
250.000
7,0%
675
0,0%
12,50%
11,50%
30,0%
1,25%
0,80%
0,00%
Investment Outlay (mill.)
Discount rate
Depreciable Life (years)
Overhead/Investment
Salvage Value
WIP Inventory/Cost of Goods
Months Downtime, Construction
After-tax Scrap Proceeds
Preliminary Engineering Costs
12,00
10%
15
3,50%
0
3%
1,5
0
0,5
Lampiran 1
GREYSTOCK'S MERSEYSIDE PROJECT
(Financial values in millions of British Pounds)
Assumptions :
Annual Output (metric tons)
Output Gain/Original Output
Price/ton (pounds sterling)
Inflation Rate (prices and costs)
Gross Margin (ex. Deprec.)
Old Gross Margin
Tax Rate
Energy Savings/Sales
1
Year
Estimate of Incremental Gross Profit
New Output (tons)
Lost Output--Construction
New Sales (Millions)
New Gross Margin
New Gross Profit
Yr. 1-5
Yr. 6-10
Yr. 11-15
Now
Old Output
Old Sales
Old Gross Profit
Incremental Gross Profit
2
3
4
5
6
7
8
9
10
Estimate of Incremental WIP Inventory
New WIP Inventory
Old WIP Inventory
Incremental WIP Inventory
Estimate of Incremental Depreciation
New Depreciation
Overhead
Prelim. Engineering Costs
Pretax Incremental Profit
Tax Expense
After-tax Profit
Cash Flow Adjustments
Less Capital Expenditures
Add back Depreciation
Less Added WIP inventory
Free Cash Flow
AVG Annual Add to EPS
PAYBACK (years)
NPV
IRR
250.000
7,0%
675
0,0%
12,50%
11,50%
30,0%
1,25%
0,80%
0,00%
1
2008
Investment Outlay (mill.)
Discount rate
Depreciable Life (years)
Overhead/Investment
Salvage Value
WIP Inventory/Cost of Goods
Months Downtime, Construction
After-tax Scrap Proceeds
Preliminary Engineering Costs
12,00
10%
15
3,50%
0
3%
1,5
0
0,5
2
2009
3
2010
4
2011
5
2012
6
2013
7
2014
8
2015
9
2016
10
2017
11
2018
12
2019
13
2020
14
2021
15
2022
267.500
(33.438)
157,99
13,75%
21,72
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
250.000
168,75
19,41
2,32
250.000
168,75
19,41
5,42
250.000
168,75
19,41
5,42
250.000
168,75
19,41
5,42
250.000
168,75
19,41
5,42
250.000
168,75
19,41
4,61
250.000
168,75
19,41
4,61
250.000
168,75
19,41
4,61
250.000
168,75
19,41
4,61
250.000
168,75
19,41
4,61
250.000
168,75
19,41
3,16
250.000
168,75
19,41
3,16
250.000
168,75
19,41
3,16
250.000
168,75
19,41
3,16
250.000
168,75
19,41
3,16
4,67
4,48
0,19
4,67
4,48
0,19
4,67
4,48
0,19
4,67
4,48
0,19
4,67
4,48
0,19
4,70
4,48
0,22
4,70
4,48
0,22
4,70
4,48
0,22
4,70
4,48
0,22
4,70
4,48
0,22
4,74
4,48
0,26
4,74
4,48
0,26
4,74
4,48
0,26
4,74
4,48
0,26
4,74
4,48
0,26
1,60
0,42
0,50
-0,20
-0,06
-0,14
1,39
0,42
1,20
0,42
1,04
0,42
0,90
0,42
0,78
0,42
0,68
0,42
0,59
0,42
0,32
0,42
0,32
0,42
0,32
0,42
0,32
0,42
0,32
0,42
0,32
0,42
0,32
0,42
3,61
1,08
2,53
3,80
1,14
2,66
3,96
1,19
2,77
4,10
1,23
2,87
3,41
1,02
2,38
3,51
1,05
2,46
3,60
1,08
2,52
3,87
1,16
2,71
3,87
1,16
2,71
2,42
0,73
1,70
2,42
0,73
1,70
2,42
0,73
1,70
2,42
0,73
1,70
2,42
0,73
1,70
1,60
-0,19
1,39
0,00
1,20
0,00
1,04
0,00
0,90
0,00
0,78
-0,03
0,68
0,00
0,59
0,00
0,32
0,00
0,32
0,00
0,32
-0,04
0,32
0,00
0,32
0,00
0,32
0,00
0,32
0,00
1,27
3,92
3,86
3,81
3,77
3,14
3,14
3,11
3,03
3,03
1,97
2,02
2,02
2,02
2,02
180,56
13,75%
24,83
180,56
13,75%
24,83
180,56
13,75%
24,83
180,56
13,75%
24,83
180,56
13,30%
24,01
180,56
13,30%
24,01
180,56
13,30%
24,01
180,56
13,30%
24,01
180,56
13,30%
24,01
180,56
12,50%
22,57
180,56
12,50%
22,57
180,56
12,50%
22,57
180,56
12,50%
22,57
180,56
12,50%
22,57
-12,00
-12,00
=
=
=
=
0,023
3,80
10,45
24,08%
Lampiran 2
MERSEYSIDE PROJECT
(Financial values in millions of British Pounds)
Assumptions :
Annual Output (metric tons)
Output Gain/Original Output
Price/ton (pounds sterling)
Inflation Rate (prices and costs)
Gross Margin (ex. Deprec.)
Old Gross Margin
Tax Rate
Energy Savings/Sales
1
Year
Estimate of Incremental Gross Profit
New Output (tons)
Lost Output--Construction
New Sales (Millions)
New Gross Margin
New Gross Profit
Yr. 1-5
Yr. 6-10
Yr. 11-15
Now
3
4
5
6
7
8
9
10
Estimate of Incremental WIP Inventory
New WIP Inventory
Old WIP Inventory
Incremental WIP Inventory
Estimate of Incremental Depreciation
New Depreciation
Overhead
Prelim. Engineering Costs
Pretax Incremental Profit
Tax Expense
After-tax Profit
Cash Flow Adjustments
Less Capital Expenditures
Add back Depreciation
Less Added WIP inventory
Free Cash Flow
AVG Annual Additio to EPS
PAYBACK (years)
NPV
IRR
1
2008
Investment Outlay (mill.)
Discount rate
Depreciable Life (years)
Overhead/Investment
Salvage Value
WIP Inventory/Cost of Goods
Months Downtime, Construction
After-tax Scrap Proceeds
Preliminary Engineering Costs
2
2009
3
2010
4
2011
5
2012
12,00
10%
15
3,50%
0
3%
1,5
0
0,5
6
2013
7
2014
8
2015
9
2016
10
2017
11
2018
12
2019
13
2020
14
2021
15
2022
267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500
(33.438)
157,99
180,56
180,56
180,56
180,56
180,56
180,56
180,56
180,56
180,56
180,56
180,56
180,56
180,56
180,56
13,75% 13,75% 13,75% 13,75% 13,75% 13,30% 13,30% 13,30% 13,30% 13,30% 12,50% 12,50% 12,50% 12,50% 12,50%
21,72
24,83
24,83
24,83
24,83
24,01
24,01
24,01
24,01
24,01
22,57
22,57
22,57
22,57
22,57
Old Output
Old Sales
Old Gross Profit
Incremental Gross Profit
2
250.000
7,0%
675
0,0%
12,50%
11,50%
30,0%
1,25%
0,80%
0,00%
250.000
168,75
19,41
2,32
250.000
168,75
19,41
5,42
250.000
168,75
19,41
5,42
250.000
168,75
19,41
5,42
250.000
168,75
19,41
5,42
250.000
168,75
19,41
4,61
250.000
168,75
19,41
4,61
250.000
168,75
19,41
4,61
250.000
168,75
19,41
4,61
250.000
168,75
19,41
4,61
250.000
168,75
19,41
3,16
250.000
168,75
19,41
3,16
250.000
168,75
19,41
3,16
250.000
168,75
19,41
3,16
250.000
168,75
19,41
3,16
4,09
4,48
-0,39
4,67
4,48
0,19
4,67
4,48
0,19
4,67
4,48
0,19
4,67
4,48
0,19
4,70
4,48
0,22
4,70
4,48
0,22
4,70
4,48
0,22
4,70
4,48
0,22
4,70
4,48
0,22
4,74
4,48
0,26
4,74
4,48
0,26
4,74
4,48
0,26
4,74
4,48
0,26
4,74
4,48
0,26
1,60
0,42
0,50
-0,20
-0,06
-0,14
1,39
0,42
1,20
0,42
1,04
0,42
0,90
0,42
0,78
0,42
0,68
0,42
0,59
0,42
0,32
0,42
0,32
0,42
0,32
0,42
0,32
0,42
0,32
0,42
0,32
0,42
0,32
0,42
3,61
1,08
2,53
3,80
1,14
2,66
3,96
1,19
2,77
4,10
1,23
2,87
3,41
1,02
2,38
3,51
1,05
2,46
3,60
1,08
2,52
3,87
1,16
2,71
3,87
1,16
2,71
2,42
0,73
1,70
2,42
0,73
1,70
2,42
0,73
1,70
2,42
0,73
1,70
2,42
0,73
1,70
1,60
0,39
1,39
-0,58
1,20
0,00
1,04
0,00
0,90
0,00
0,78
-0,02
0,68
0,00
0,59
0,00
0,32
0,00
0,32
0,00
0,32
-0,04
0,32
0,00
0,32
0,00
0,32
0,00
0,32
0,00
1,85
3,33
3,86
3,81
3,77
3,14
3,14
3,11
3,03
3,03
1,97
2,02
2,02
2,02
2,02
-12,00
-12,00
=
=
=
=
0,023
3,80
10,50
24,30%
ALTERNATIVE SOLUTION
Concern of The Transport Division :
• Will Need a New Tank Car to anticipated growth of the firm in
other areas because of increased throughtput of the machine.
• The Investment of a New Tank Car estimated to be GBP 2 million in
2010
• The New Tank Car would have a depreciable life of 10 years using
DDB Depreciation for the first 8 years and straight-line depreciation
for the last two years. Tank car.xlsx
MERSEYSIDE PROJECT
(With a New Tank Car Investment)
(Financial values in millions of British Pounds)
Assumptions :
Annual Output (metric tons)
Output Gain/Original Output
Price/ton (pounds sterling)
Inflation (prices and costs)
Gross Margin (ex. Deprec.)
Old Gross Margin
Tax Rate
Energy Savings/Sales
1
Year
Estimate of Incremental Gross Profit
New Output
Lost Output--Construction
New Sales (Millions)
New Gross Margin
New Gross Profit
Yr. 1-5
Yr. 6-10
Yr. 11-15
0
Now
2 Estimate of Incremental WIP Inventory
New WIP Inventory
Old WIP Inventory
Incremental WIP Inventory
3 Estimate of Incremental Depreciation
+ New Depreciation-Plant
+ New Depreciation, Tank Cars
Total Change in Depreciation
4 Overhead
5 Prelim. Engineering Costs
6 Pretax Incremental Profit
7 Tax Expense
8 After-tax Profit
Free
10 Cash Flow
AVG Annual Additio to EPS
PAYBACK (years)
NPV
IRR
1
2008
Investment Outlay (mill.) - Plant
Investment in Tank Cars
Discount rate
Depreciable Life (years) Plant
Depreciable Life (yrs.) Tank Cars
Overhead/Investment
Salvage Value
WIP Inventory/Cost of Goods Sold
Months Downtime, Construction
Preliminary Engineering Costs
2
2009
3
2010
4
2011
5
2012
12
2
10%
15
10
3,50%
0%
3%
1,50
0,50
6
2013
7
2014
8
2015
9
2016
10
2017
11
2018
12
2019
13
2020
14
2021
267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500
(33.438)
157,99
180,56
180,56
180,56
180,56
180,56
180,56
180,56
180,56
180,56
180,56
180,56
180,56
180,56
13,75% 13,75% 13,75% 13,75% 13,75% 13,30% 13,30% 13,30% 13,30% 13,30% 12,50% 12,50% 12,50% 12,50%
21,72
24,83
24,83
24,83
24,83
24,01
24,01
24,01
24,01
24,01
22,57
22,57
22,57
22,57
Old Output
Old Sales
Old Gross Profit
Incremental Gross Profit
9 Cash Flow Adjustments
Add back Depreciation
Added WIP inventory
Capital Investment
250.000
7%
675
0,00%
12,50%
11,50%
30%
1,25%
0,80%
0,00%
250.000
168,75
19,41
2,32
250.000
168,75
19,41
5,42
250.000
168,75
19,41
5,42
250.000
168,75
19,41
5,42
250.000
168,75
19,41
5,42
250.000
168,75
19,41
4,61
250.000
168,75
19,41
4,61
250.000
168,75
19,41
4,61
250.000
168,75
19,41
4,61
250.000
168,75
19,41
4,61
250.000
168,75
19,41
3,16
250.000
168,75
19,41
3,16
250.000
168,75
19,41
3,16
250.000
168,75
19,41
3,16
4,09
4,48
-0,39
4,67
4,48
0,19
4,67
4,48
0,19
4,67
4,48
0,19
4,67
4,48
0,19
4,70
4,48
0,22
4,70
4,48
0,22
4,70
4,48
0,22
4,70
4,48
0,22
4,70
4,48
0,22
4,74
4,48
0,26
4,74
4,48
0,26
4,74
4,48
0,26
4,74
4,48
0,26
1,60
1,39
1,60
0,42
0,50
-0,20
-0,06
-0,14
1,39
0,42
1,20
0,40
1,60
0,42
1,04
0,32
1,36
0,42
0,90
0,26
1,16
0,42
0,78
0,20
0,99
0,42
0,68
0,16
0,84
0,42
0,59
0,13
0,72
0,42
0,32
0,10
0,42
0,42
0,32
0,08
0,40
0,42
0,32
0,17
0,49
0,42
0,32
0,17
0,49
0,42
0,32
0,00
0,32
0,42
0,32
0,00
0,32
0,42
3,61
1,08
2,53
3,40
1,02
2,38
3,64
1,09
2,55
3,84
1,15
2,69
3,20
0,96
2,24
3,35
1,00
2,34
3,47
1,04
2,43
3,76
1,13
2,63
3,78
1,14
2,65
2,26
0,68
1,58
2,26
0,68
1,58
2,42
0,73
1,70
2,42
0,73
1,70
1,60
-0,39
1,39
-0,58
1,60
0,00
-2,00
1,36
0,00
1,16
0,00
0,99
-0,02
0,84
0,00
0,72
0,00
0,42
0,00
0,40
0,00
0,49
-0,04
0,49
0,00
0,32
0,00
0,32
0,00
1,07
3,33
1,98
3,91
3,85
3,20
3,18
3,15
3,06
3,05
2,02
2,07
2,02
2,02
-12,00
-12,00
=
=
=
=
0,022
4,40
8,62
21,03%
ALTERNATIVE SOLUTION
Concern of The Marketing
Department :
• With a new project will reduce the
cost at Merseyside and Victoria
Chemicals might be able to take
business from the plants of
competitors such as Saone-Poulet
or Vaysol.
• Cannibalize business at Rotterdam
in his preliminary analysis of the
Merseyside Project.
• Morris
still wanted to review
Greystock’s analysis in detail the
potential loss of business volume at
rotterdam
• Loss Rotterdam.xlsx
(Loss of business volume at Rotterdam)
(Financial values in millions of British Pounds)
Assumptions
Annual Output (metric tons)
Output Gain/Original Output
Price/ton (pounds sterling)
Inflation (prices and costs)
Gross Margin (ex. Deprec.)
Old Gross Margin
Tax Rate
Energy Savings/Sales
Yr. 1-5
Yr. 6-10
Yr. 11-15
Year
1
Now
Estimate of Incremental Gross Profit
New Output
Lost Output--Construction
New Sales (Millions)
New Gross Margin
New Gross Profit
Old Output
Old Sales
Old Gross Profit
Lost Rotterdam Output (MT)
Lost Revenue
Lost Rotterdam Gross Profit
Incremental Gross Profit
2
3
4
5
6
7
8
9
Estimate of Incremental WIP Inventory
New WIP Inventory
Old WIP Inventory
Incremental WIP Inventory
Estimate of Incremental Depreciation
+ New Depreciation, Plant
+ New Depreciation,Tank Cars
Total Change in Depreciation
Overhead
Prelim. Engineering Costs
Pretax Incremental Profit
Tax Expense
After-tax Profit
Cash Flow Adjustments
Add back Depreciation
Change in WIP Inventory
At Merseyside
At Rotterdam
Capital Investment
10 Free Cash Flow
AVG Annual Add to EPS
PAYBACK (years)
NPV
IRR
250.000
7%
675
0%
12,50%
11,50%
30%
1,25%
0,8%
0,0%
Investment Outlay (mill.) - Plant
Investment in Tank Cars
Discount rate
Depreciable Life (years) Plant
Depreciable Life (yrs.) Tank Cars
Overhead/Investment
Salvage Value
WIP Inventory/Cost of Goods
Months Downtime, Construction
1
2008
2
2009
3
2010
4
2011
5
2012
6
2013
7
2014
8
2015
9
2016
10
2017
11
2018
12
2019
13
2020
14
2021
267.500
(33.438)
157,99
13,8%
21,72
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
250.000
168,75
19,41
250.000
168,75
19,41
250.000
168,75
19,41
250.000
168,75
19,41
250.000
168,75
19,41
250.000
168,75
19,41
250.000
168,75
19,41
250.000
168,75
19,41
250.000
168,75
19,41
250.000
168,75
19,41
250.000
168,75
19,41
250.000
168,75
19,41
250.000
168,75
19,41
250.000
168,75
19,41
17.500
11,81
1,36
17.500
11,81
1,36
17.500
11,81
1,36
17.500
11,81
1,36
17.500
11,81
1,36
17.500
11,81
1,36
17.500
11,81
1,36
17.500
11,81
1,36
17.500
11,81
1,36
17.500
11,81
1,36
17.500
11,81
1,36
17.500
11,81
1,36
17.500
11,81
1,36
17.500
11,81
1,36
0,96
4,06
4,06
4,06
4,06
3,25
3,25
3,25
3,25
3,25
1,81
1,81
1,81
1,81
4,09
4,48
-0,39
4,67
4,48
0,19
4,67
4,48
0,19
4,67
4,48
0,19
4,67
4,48
0,19
4,70
4,48
0,22
4,70
4,48
0,22
4,70
4,48
0,22
4,70
4,48
0,22
4,70
4,48
0,22
4,74
4,48
0,26
4,74
4,48
0,26
4,74
4,48
0,26
4,74
4,48
0,26
1,60
1,39
1,20
0,40
1,04
0,32
0,90
0,26
0,78
0,20
0,68
0,16
0,59
0,13
0,32
0,13
0,32
0,13
0,32
0,13
0,32
0,13
0,32
0,00
0,32
0,00
1,60
0,42
0,50
-1,56
-0,47
-1,09
1,39
0,42
1,60
0,42
1,36
0,42
1,16
0,42
0,99
0,42
0,84
0,42
0,72
0,42
0,45
0,42
0,45
0,42
0,45
0,42
0,45
0,42
0,32
0,42
0,32
0,42
2,26
0,68
1,58
2,04
0,61
1,43
2,28
0,68
1,60
2,48
0,75
1,74
1,84
0,55
1,29
1,99
0,60
1,39
2,11
0,63
1,48
2,38
0,71
1,67
2,38
0,71
1,67
0,94
0,28
0,65
0,94
0,28
0,65
1,07
0,32
0,75
1,07
0,32
0,75
1,60
1,39
1,60
1,36
1,16
0,99
0,84
0,72
0,45
0,45
0,45
0,45
0,32
0,32
0,39
-0,39
-0,19
0,19
-0,19
0,19
-2,00
-0,19
0,19
-0,19
0,19
-0,22
0,22
-0,22
0,22
-0,22
0,22
-0,22
0,22
-0,22
0,22
-0,26
0,26
-0,26
0,26
-0,26
0,26
-0,26
0,26
0,51
2,97
1,03
2,96
2,90
2,28
2,23
2,20
2,12
2,12
1,10
1,10
1,07
1,07
180,56
13,8%
24,83
-12,00
-12,00
=
=
=
=
12
2
10%
15
10
3,5%
0
3,0%
1,50
0,012
5,70
2,26
13,32%
180,56
13,8%
24,83
180,56
13,8%
24,83
180,56
13,8%
24,83
180,56
13,3%
24,01
180,56
13,3%
24,01
180,56
13,3%
24,01
180,56
13,3%
24,01
180,56
13,3%
24,01
180,56
12,5%
22,57
180,56
12,5%
22,57
180,56
12,5%
22,57
180,56
12,5%
22,57
ALTERNATIVE SOLUTION
Concern of The Treasury Staff:
The Treasury staff think this
impounds a long term
inflation expectation of 3%
per year and target rate of
return is 7%
• inflasi.xlsx
MERSEYSIDE PROJECT
(With Inflation)
(Financial values in millions of British Pounds)
Assumptions :
Annual Output (metric tons)
Output Gain/Original Output
Price/ton (pounds sterling)
Inflation (prices and costs)
Gross Margin (ex. Deprec.)
Old Gross Margin
Tax Rate
Energy Savings/Sales
1
Year
Estimate of Incremental Gross Profit
New Output
Lost Output--Construction
New Sales (Millions)
New Gross Margin
New Gross Profit
Yr. 1-5
Yr. 6-10
Yr. 11-15
0
Now
2 Estimate of Incremental WIP Inventory
New WIP Inventory
Old WIP Inventory
Incremental WIP Inventory
3 Estimate of Incremental Depreciation
+ New Depreciation-Plant
+ New Depreciation, Tank Cars
Total Change in Depreciation
4 Overhead
5 Prelim. Engineering Costs
6 Pretax Incremental Profit
7 Tax Expense
8 After-tax Profit
Free
10 Cash Flow
AVG Annual Add to EPS
PAYBACK (years)
NPV
IRR
1
2008
Investment Outlay (mill.) - Plant
Investment in Tank Cars
Discount rate
Depreciable Life (years) Plant
Depreciable Life (yrs.) Tank Cars
Overhead/Investment
Salvage Value
WIP Inventory/Cost of Goods Sold
Months Downtime, Construction
Preliminary Engineering Costs
2
2009
3
2010
4
2011
5
2012
12
2
7%
15
10
3,50%
0%
3%
1,50
0,50
6
2013
7
2014
8
2015
9
2016
10
2017
11
2018
12
2019
13
2020
14
2021
267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500 267.500
(33.438)
157,99
185,98
191,56
197,31
203,22
209,32
215,60
222,07
228,73
235,59
242,66
249,94
257,44
265,16
13,75% 13,75% 13,75% 13,75% 13,75% 13,30% 13,30% 13,30% 13,30% 13,30% 12,50% 12,50% 12,50% 12,50%
21,72
25,57
26,34
27,13
27,94
27,84
28,67
29,54
30,42
31,33
30,33
31,24
32,18
33,15
Old Output
Old Sales
Old Gross Profit
Incremental Gross Profit
9 Cash Flow Adjustments
Add back Depreciation
Added WIP inventory
Capital Investment
250.000
7%
675
3,00%
12,50%
11,50%
30%
1,25%
0,80%
0,00%
250.000
168,75
19,41
2,32
250.000
173,81
19,99
5,58
250.000
179,03
20,59
5,75
250.000
184,40
21,21
5,92
250.000
189,93
21,84
6,10
250.000
195,63
22,50
5,34
250.000
201,50
23,17
5,50
250.000
207,54
23,87
5,67
250.000
213,77
24,58
5,84
250.000
220,18
25,32
6,01
250.000
226,79
26,08
4,25
250.000
233,59
26,86
4,38
250.000
240,60
27,67
4,51
250.000
247,82
28,50
4,65
4,09
4,48
-0,39
4,81
4,61
0,20
4,96
4,75
0,20
5,11
4,90
0,21
5,26
5,04
0,22
5,44
5,19
0,25
5,61
5,35
0,26
5,78
5,51
0,27
5,95
5,68
0,27
6,13
5,85
0,28
6,37
6,02
0,35
6,56
6,20
0,36
6,76
6,39
0,37
6,96
6,58
0,38
1,60
1,39
1,60
0,42
0,50
-0,20
-0,06
-0,14
1,39
0,42
1,20
0,40
1,60
0,42
1,04
0,32
1,36
0,42
0,90
0,26
1,16
0,42
0,78
0,20
0,99
0,42
0,68
0,16
0,84
0,42
0,59
0,13
0,72
0,42
0,32
0,10
0,42
0,42
0,32
0,08
0,40
0,42
0,32
0,17
0,49
0,42
0,32
0,17
0,49
0,42
0,32
0,00
0,32
0,42
0,32
0,00
0,32
0,42
3,78
1,13
2,64
3,73
1,12
2,61
4,14
1,24
2,90
4,52
1,36
3,17
3,94
1,18
2,75
4,24
1,27
2,97
4,53
1,36
3,17
4,99
1,50
3,50
5,19
1,56
3,63
3,34
1,00
2,34
3,47
1,04
2,43
3,77
1,13
2,64
3,91
1,17
2,73
1,60
-0,39
1,39
-0,59
1,60
-0,01
-2,00
1,36
-0,01
1,16
-0,01
0,99
-0,03
0,84
-0,01
0,72
-0,01
0,42
-0,01
0,40
-0,01
0,49
-0,07
0,49
-0,01
0,32
-0,01
0,32
-0,01
1,07
3,44
2,21
4,26
4,32
3,71
3,80
3,88
3,91
4,03
2,76
2,91
2,95
3,04
-12,00
-12,00
=
=
=
=
0,029
4,30
17,55
24,10%
RECOMENDATION
• The Merseyside plant must to modernize the machine to
increase the throughout and lower cost of energy.
• The Transport Division need to purchase the new tank cars
at Merseyside (estimate purchase GBP 2 Million in 2010).
• Merseyside can save stock everymonth or transfer stock
from Rotterdam
• We Are not agree about Merseyside will oversupply and
Cannibalize the Rotterdam supply.
• Reasonable if the Treasury Staff concern about Inflation 3%
per year and Rate of Return 7% per year.
• Rejected EPC Project .
• inflasi 2.xlsx
Lampiran 5
MERSEYSIDE PROJECT
(With Inflation)
(Financial values in millions of British Pounds)
Assumptions :
Annual Output (metric tons)
Output Gain/Original Output
Price/ton (pounds sterling)
Inflation (prices and costs)
Gross Margin (ex. Deprec.)
Old Gross Margin
Tax Rate
Energy Savings/Sales
1
Year
Estimate of Incremental Gross Profit
New Output
Lost Output--Construction
New Sales (Millions)
New Gross Margin
New Gross Profit
Yr. 1-5
Yr. 6-10
Yr. 11-15
0
Now
2 Estimate of Incremental WIP Inventory
New WIP Inventory
Old WIP Inventory
Incremental WIP Inventory
3 Estimate of Incremental Depreciation
+ New Depreciation-Plant
+ New Depreciation, Tank Cars
Total Change in Depreciation
4 Overhead
5 Prelim. Engineering Costs
6 Pretax Incremental Profit
7 Tax Expense
8 After-tax Profit
Free
10 Cash Flow
AVG Annual Add to EPS
PAYBACK (years)
NPV
IRR
Investment Outlay (mill.) - Plant
Investment in Tank Cars
Discount rate
Depreciable Life (years) Plant
Depreciable Life (yrs.) Tank Cars
Overhead/Investment
Salvage Value
WIP Inventory/Cost of Goods Sold
Months Downtime, Construction
Preliminary Engineering Costs
2
2009
3
2010
4
2011
5
2012
6
2013
7
2014
8
2015
9
2016
10
2017
11
2018
12
2019
13
2020
14
2021
15
2022
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
267.500
185,98
13,75%
25,57
=
=
=
=
191,56
13,75%
26,34
197,31
13,75%
27,13
203,22
13,75%
27,94
209,32
13,30%
27,84
215,60
13,30%
28,67
222,07
13,30%
29,54
228,73
13,30%
30,42
235,59
13,30%
31,33
242,66
12,50%
30,33
249,94
12,50%
31,24
257,44
12,50%
32,18
265,16
12,50%
33,15
273,12
12,50%
34,14
250.000
168,75
19,41
5,42
250.000
173,81
19,99
5,58
250.000
179,03
20,59
5,75
250.000
184,40
21,21
5,92
250.000
189,93
21,84
6,10
250.000
195,63
22,50
5,34
250.000
201,50
23,17
5,50
250.000
207,54
23,87
5,67
250.000
213,77
24,58
5,84
250.000
220,18
25,32
6,01
250.000
226,79
26,08
4,25
250.000
233,59
26,86
4,38
250.000
240,60
27,67
4,51
250.000
247,82
28,50
4,65
250.000
255,25
29,35
4,79
4,67
4,48
0,19
4,81
4,61
0,20
4,96
4,75
0,20
5,11
4,90
0,21
5,26
5,04
0,22
5,44
5,19
0,25
5,61
5,35
0,26
5,78
5,51
0,27
5,95
5,68
0,27
6,13
5,85
0,28
6,37
6,02
0,35
6,56
6,20
0,36
6,76
6,39
0,37
6,96
6,58
0,38
7,17
6,78
0,39
1,60
1,39
1,60
0,42
0,50
2,90
0,87
2,03
1,39
0,42
1,20
0,40
1,60
0,42
1,04
0,32
1,36
0,42
0,90
0,26
1,16
0,42
0,78
0,20
0,99
0,42
0,68
0,16
0,84
0,42
0,59
0,13
0,72
0,42
0,32
0,10
0,42
0,42
0,32
0,08
0,40
0,42
0,32
0,17
0,49
0,42
0,32
0,17
0,49
0,42
0,32
0,00
0,32
0,42
0,32
0,00
0,32
0,42
0,32
0,00
0,32
0,42
3,78
1,13
2,64
3,73
1,12
2,61
4,14
1,24
2,90
4,52
1,36
3,17
3,94
1,18
2,75
4,24
1,27
2,97
4,53
1,36
3,17
4,99
1,50
3,50
5,19
1,56
3,63
3,34
1,00
2,34
3,47
1,04
2,43
3,77
1,13
2,64
3,91
1,17
2,73
4,05
1,21
2,83
1,60
0,19
1,39
-0,01
1,60
-0,01
-2,00
1,36
-0,01
1,16
-0,01
0,99
-0,03
0,84
-0,01
0,72
-0,01
0,42
-0,01
0,40
-0,01
0,49
-0,07
0,49
-0,01
0,32
-0,01
0,32
-0,01
0,32
-0,01
3,82
4,02
2,21
4,26
4,32
3,71
3,80
3,88
3,91
4,03
2,76
2,91
2,95
3,04
3,14
-12,00
-12,00
12
2
7%
15
10
3,50%
0%
3%
1,50
0,50
1
2008
180,56
13,75%
24,83
Old Output
Old Sales
Old Gross Profit
Incremental Gross Profit
9 Cash Flow Adjustments
Add back Depreciation
Added WIP inventory
Capital Investment
250.000
7%
675
3,00%
12,50%
11,50%
30%
1,25%
0,80%
0,00%
0,030
3,50
20,63
30,01%