Professional Documents
Culture Documents
Diamond Chemicals B Exhibit
Diamond Chemicals B Exhibit
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
Investment Outlay (mill.)
Energy Savings/Sales
Yr. 1-5
Yr. 6-10
Yr. 11-15
0
Year
Now
1. Estimate of Incremental Gross Profit
New Output (tons)
Lost Output--Construction
New Sales (Millions)
New Gross Margin
New Gross Profit
Old Output
Old Sales
Old Gross Profit
Incremental Gross Profit
2. Estimate of Incremental Depreciation
New Depreciation
New Depreciation - Tank
Depreciation - Tank
3. Overhead
4. Prelim. Engineering Costs
5. Pretax Incremental Profit
6. Tax Expense
7. After-tax Profit
8. Cash Flow Adjustments
Less Capital Expenditures
Add back Depreciation
Less Added WIP inventory
Discount rate
Depreciable Life (years)
Overhead/Investment
Salvage Value
WIP Inventory/Cost of Goods
Months Downtime, Construction
After-tax Scrap Proceeds
Preliminary Engineering Costs
Investment outlay-Tank (mill.)
Depreciable Life-Tank (years)
2
2002
3
2003
250,000
161.50
18.57
4.32
250,000
166.34
19.13
4.45
250,000
171.33
19.70
4.59
250,000
176.47
20.29
4.72
1.20
1.04
0.90
0.40
0.78
0.32
0.00
0.00
0.66
0.20
0.00
0.00
0.00
0.68
0.26
-0.42
0.00
0.59
0.20
-0.34
0.00
0.51
0.16
-0.27
0.00
0.44
0.13
-0.21
0.00
0.38
0.10
-0.18
0.00
0.33
0.08
-0.14
0.00
0.43
0.17
-0.11
0.00
3.44
1.03
3.31
0.99
3.65
1.09
4.38
1.31
3.75
1.12
3.92
1.18
4.09
1.23
4.28
1.28
4.45
1.34
0.46
2.40
2.32
2.55
3.06
2.62
2.75
2.86
3.00
1.04
-0.47
-2.00
1.30
0.00
1.10
0.00
2.12
0.51
-0.01
0.45
-0.03
0.40
-0.01
0.36
-0.01
2.97
1.61
3.65
5.69
3.04
3.14
17,500
10.35
1.19
0.83
0.31
(0.52)
17,500
10.66
1.23
0.86
0.32
(0.54)
17,500
10.98
1.26
0.88
0.33
(0.55)
17,500
11.30
1.30
0.91
0.34
(0.57)
1.20
0.31
183.32
13.3%
24.29
267,500
11
2011
250,000
156.79
18.03
4.20
177.98
13.3%
23.58
267,500
10
2010
250,000
152.23
17.51
4.89
172.80
13.3%
22.90
267,500
9
2009
250,000
147.79
17.00
4.75
167.77
13.3%
22.23
267,500
8
2008
250,000
143.49
16.50
4.61
162.88
13.8%
22.40
267,500
7
2007
250,000
139.31
16.02
4.48
158.14
13.8%
21.74
267,500
6
2006
250,000
135.25
15.55
1.86
153.53
13.8%
21.11
267,500
5
2005
267,500
149.06
13.8%
20.50
267,500
4
2004
267,500
(33,438)
126.63
13.8%
17.41
(9.00)
250,000
7.0%
541
3.0%
12.50%
11.5%
30.0%
9.00
1.25%
0.8%
0.0%
1
2001
188.82
13.3%
25.02
267,500
194.49
12.5%
24.31
250,000
181.76
20.90
3.41
12
2012
267,500
200.32
12.5%
25.04
250,000
187.22
21.53
3.51
13
2013
267,500
206.33
12.5%
25.79
14
2014
267,500
212.52
12.5%
26.57
15
2015
267,500
218.90
12.5%
27.36
250,000
192.83
22.18
3.62
250,000
198.62
22.84
3.72
250,000
204.58
23.53
3.84
0.43
0.17
-0.09
0.00
0.43
0.43
0.43
0.00
0.00
0.00
2.92
0.88
3.00
0.90
3.19
0.96
3.29
0.99
3.41
1.02
3.12
2.04
2.10
2.23
2.31
2.38
0.31
-0.01
0.27
-0.01
0.49
-0.05
0.51
-0.01
0.43
-0.01
0.43
-0.01
0.43
-0.01
0.32
3.22
3.30
3.38
2.48
2.60
2.65
2.73
3.13
17,500
11.64
1.34
0.94
0.35
(0.59)
17,500
11.99
1.38
0.97
0.36
(0.61)
17,500
12.35
1.42
0.99
0.37
(0.62)
17,500
12.72
1.46
1.02
0.38
(0.64)
17,500
13.11
1.51
1.05
0.39
(0.66)
17,500
13.50
1.55
1.09
0.40
(0.68)
17,500
13.90
1.60
1.12
0.42
(0.70)
17,500
14.32
1.65
1.15
0.43
(0.72)
0.00
-9.00
13.96
1.97
NPV =
IRR =
31.2%
10. Adjustment for erosion in Rotterdam volume:
Lost Rotterdam Output
Lost Rotterdam Revenue
Lost Rotterdam Gross Profits
Lost Gross Profits after Taxes
Change in Rotterdam Inventory
Total Effect on Free Cash Flow
DCF, Erosion Rotterdam
(3.85)
DCF, Merseyside Adjusted for Full Erosion
at Rotterdam =
10.11
Payback
17,500
9.75
1.12
0.78
0.29
(0.49)
Payback
3.67
17,500
10.04
1.16
0.81
0.30
(0.51)
4.06
Exhibit 3
DIAMOND CHEMICALS (B)
Assumptions
Annual Output (metric tons)
Output Gain Per Year/Prior Year
Maximum Possible Output
Price/ton (pounds sterling)
Inflation (prices and costs)
Gross Margin Growth Rate/Year
Maximum Possible Gross Margin
Old Gross Margin
Tax Rate
Investment Outlay (millions)
Year
1. Estimate of Incremental Gross Profit
New Output
Lost Output--Construction
New Sales (Millions)
New Gross Margin
New Gross Profit
Now
2001
2002
2003
0
Now
Old Output
Old Sales
Old Gross Profit
Incremental Gross Profit
2. Estimate of Incremental Depreciation
Outlays
Yr. 1 Outlays
Yr. 2 Outlays
Yr. 3 Outlays
Total, New Depreciation
Opportunity Cost
-2.5
3. Overhead
4. Pretax Incremental Profit
(0.75)
5. Tax Expense
6. After-tax Profit
(1.75)
7. Cash Flow Adjustments
Add back Depreciation
Less added WIP inventory
250,000
2.0%
267,500
541
3.0%
0.80%
16.0%
11.5%
30.0%
3.5
2.5
1
1
1
2001
2
2002
3
2003
255,000
(106,250)
80.47
11.6%
9.33
260,100
(86,700)
96.62
11.8%
11.38
265,302
(66,326)
114.20
12.1%
13.78
267,500
250,000
135.25
15.55
(6.23)
250,000
139.31
16.02
(4.64)
250,000
143.49
16.50
(2.72)
250,000
147.79
17.00
2.70
250,000
152.23
17.51
3.60
250,000
156.79
18.03
4.78
250,000
161.50
18.57
6.27
250,000
166.34
19.13
8.14
250,000
171.33
19.70
9.63
250,000
176.47
20.29
9.92
250,000
181.76
20.90
10.22
250,000
187.22
21.53
10.52
250,000
192.83
22.18
10.84
250,000
198.62
22.84
11.16
250,000
204.58
23.53
11.50
0.30
0.22
0.10
0.13
0.76
0.26
0.19
0.09
0.11
0.65
0.23
0.16
0.08
0.09
0.56
0.20
0.14
0.07
0.08
0.48
0.17
0.12
0.06
0.07
0.42
0.15
0.11
0.05
0.06
0.36
0.13
0.09
0.04
0.05
0.31
0.17
0.12
0.04
0.04
0.36
0.17
0.12
0.05
0.03
0.37
0.17
0.12
0.05
0.06
0.40
0.17
0.12
0.05
0.06
0.40
0.17
0.12
0.05
0.06
0.40
Discount rate
Depreciable Life (years)
Overhead/Investment
Salvage Value
WIP Inventory/Cost of Goods Sold
Terminal Value of Right-of-Way
Months Downtime, Construction
4
2004
158.14
12.5%
19.69
5
2005
267,500
162.88
13.0%
21.11
2001
2002
2003
2004
10.0%
15
3.5%
0
3.0%
35
5
4
3
0
6
2006
7
2007
267,500
167.77
13.6%
22.81
267,500
172.80
14.4%
24.84
8
2008
267,500
177.98
15.3%
27.27
9
2009
267,500
183.32
16.0%
29.33
10
2010
267,500
188.82
16.0%
30.21
11
2011
267,500
194.49
16.0%
31.12
12
2012
267,500
200.32
16.0%
32.05
13
2013
267,500
206.33
16.0%
33.01
14
2014
267,500
212.52
16.0%
34.00
15
2015
267,500
218.90
16.0%
35.02
0.47
0.33
0.40
0.29
0.14
0.80
0.84
0.35
0.25
0.12
0.15
0.88
0.12
(7.15)
(2.14)
(5.00)
0.13
(5.60)
(1.68)
(3.92)
0.13
(3.73)
(1.12)
(2.61)
0.13
1.81
0.54
1.27
0.14
2.81
0.84
1.97
0.14
4.07
1.22
2.85
0.15
5.64
1.69
3.95
0.15
7.57
2.27
5.30
0.16
9.11
2.73
6.38
0.16
9.45
2.83
6.61
0.16
9.69
2.91
6.78
0.17
9.98
2.99
6.98
0.17
10.26
3.08
7.18
0.18
10.58
3.17
7.41
0.19
10.91
3.27
7.64
0.80
1.46
0.84
(0.32)
0.88
(0.34)
0.76
(1.03)
0.65
0.02
0.56
0.03
0.48
0.03
0.42
0.05
0.36
0.03
0.31
-
0.36
-
0.37
-
0.40
-
0.40
-
0.40
(0.07)
1.00
2.64
16.4%
3.44
4.46
5.76
Payback
6.77
8.10
6.92
7.14
7.36
7.58
7.81
Capital Spending
3.50
2.50
1.00
1.00
Terminal Value, land
8. Free Cash Flow
(5.25)
(5.25)
(4.40)
(3.08)
DCF, Rotterdam =
9.84
IRR, Rotterdam =
9. Adjustment for erosion in Merseyside volume:
Lost Merseyside Output
Lost Merseyside Revenue
Lost Merseyside Gross Profits
Lost Gross Profits after Taxes
Change in Merseyside Inventory
Total Effect on Free Cash Flow
DCF, Erosion Merseyside
(3.27)
Rate of Cannibalization
100%
DCF, Rotterdam Adjusted for Full Erosion
IRR
at Merseyside =
6.57
17,500
10.35
1.19
0.83
0.27
(0.56)
17,500
10.66
1.23
0.86
0.28
(0.57)
14.45%
17,500
10.98
1.26
0.88
0.29
(0.59)
17,500
11.30
1.30
0.91
0.30
(0.61)
17,500
11.64
1.34
0.94
0.31
(0.63)
Payback
17,500
11.99
1.38
0.97
0.32
(0.65)
8.59
17,500
12.35
1.42
0.99
0.33
(0.67)
17,500
12.72
1.46
1.02
0.34
(0.69)
17,500
13.11
1.51
1.05
0.35
(0.71)
17,500
13.50
1.55
1.09
0.36
(0.73)
17,500
13.90
1.60
1.12
0.37
(0.75)
8.04
17,500
14.32
1.65
1.15
0.38
(0.77)