Essay on Victoria Chemicals

944 Words Jan 28th, 2012 4 Pages
I am pleased to share my concerns, analysis and recommendation about the Merseyside Project with you. Your DCF analysis is excellent and helpful. However, I have to make some changes to it. The memo will be divided into 6 parts.
 Suggestions for Merseyside project: P1
 What should change in the DCF analysis and why: P1-P3
 Other important issues: P3-P4
 Evaluation of each investment Criteria: P4-P5
 Ultimate recommendation and forward looking: P5-P6
 Revised DCF analysis: Appendix

Changes to capital project?
Since reviewing and discussing the proposal, several things have come to light and we are requesting some changes to the DCF analysis to include some potential solutions. First, it is agreed that the price for
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If it weren’t to be configured with this rate, then it should be stated in the manual produced for capital budgeting.
Concerns of the Transport Division
Add GBP2 million
Concerns of the ICG Sales and Marketing Department
Cannibalization
Concerns of the Assistant Plant Manager
Accept Griffin’s proposal and add initial cost GBP1 million and infinite cash inflow GBP25, 000.
It is a real story. There are two four-star hotels in my hometown. They have almost same size, same price and similar location. One is more profitable than another, however. The manager of that hotel told me the reason which was very impressive. The biggest reason is that his hotel has more entertainment facilities. For example, it has bowling alley for sports lovers, maze for children and video game for teenagers. To my surprise, all of them operate at net loss every year, which means the net present value of each facility is negative. The manager said, “It sounds stupid that we accept the project with negative NPV. Our biggest competitor, another hotel in the town, is not willing to do such stupid things. However, when we are doing so, we get good word-or-mouth. Customers are able to find everything they need in our hotel. Imagine that when a company has customers or business partners, which hotel they will choose.

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