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TiO2 Financial
TiO2 Financial
TiO2 Financial
:
Titanium Dioxide
E. I.
du Pont de Nemours and Company
Du Pont's position in the market was fortunate for several reasons. First,
Du Pont was a leader in the Titanium Dioxide industry possessing the
highest capacity for use of the ilmelite chloride process. Two recent
developments in the industry, sharp increases in the cost of rutile ore
required for the sulfite based process and the heightened environmental
regulations enacted against domestic sulfur based plants made the ilmelite
chloride process more attractive. Du Pont had a competitive advantage in
the ilmelite chloride process accounting for approximately 60% of the total
market production in 1970. This advantage was strengthened by the fact
that the number two producer, NL Industries, was highly leveraged and the
other producers in the market were relatively much smaller. This
competitive advantage translated to an average pre-tax profit margin of
40% doubling that of its competitors in the industry. Therefore, the
company could afford to cut prices as needed to keep future competitors
out of the industry and maintain market shar
Incremental Cash Flow Statement for - Maintain
Strategy
Incremental Cash Flow Statement for - Growth
Strategy
NPV FOR MAINTAIN TRETEGY
NPV FOR GROWTH STRETEGY
Incremental Net Present Value
GROWTH STRETEGY
1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985
Total Incremental EBIAT $ (2.1) $ (4.0) $ 5.8 $ 9.1 $ 19.7 $ 25.2 $ 30.3 $ 43.7 $ 60.2 $ 74.1 $ 88.6 $ 101.7 $ 119.1
ITC @ 10% 2.3 2.3 2.4 2.1 2.2 3.3 3.2 2.8 2.5 3.2 4.5 3.6 5.1
Incremental Inflow $ 0.20 $ (1.71) $ 8.23 $ 11.20 $ 21.90 $ 28.52 $ 33.48 $ 46.48 $ 62.68 $ 77.26 $ 93.08 $ 105.36 $ 124.21
Incremental Investment $ 22.50 $ 23.18 $ 23.88 $ 20.64 $ 22.29 $ 33.38 $ 32.25 $ 27.68 $ 25.08 $ 31.70 $ 44.77 $ 36.13 $ 51.32
Addition to NWC $ (0.76) $ (0.76) $ 8.39 $ 3.28 $ 9.82 $ 5.66 $ 4.78 $ 11.79 $ 13.29 $ 10.63 $ 12.89 $ 12.07 $ 16.16
Incremental Outflow $ 21.74 $ 22.42 $ 32.27 $ 23.92 $ 32.10 $ 39.03 $ 37.03 $ 39.46 $ 38.37 $ 42.33 $ 57.66 $ 48.20 $ 67.48
Terminal Value $ 502.01
Incremental free cash $ (21.54) $ 24.13) $ 24.04) $ 12.73) $ 10.20) $ 10.52) $ (3.54) $ 7.02 $ 24.31 $ 34.94 $ 35.42 $ 57.16 $ 558.73
flow
MAINTAIN STRETEGY
Total Incremental EBIAT $ - $ - $ 5.31 $ 8.15 $ 10.90 $ 13.82 $ 16.86 $ 20.39 $ 24.80 $ 28.48 $ 33.74 $ 38.04 $ 42.58
ITC @ 10% 1.35 0.927 0.955 0.983 1.1143 1.1473 1.29 1.3284 1.368 1.5262 1.694 1.6198 1.7962
Incremental Inflow $ 1.35 $ 0.93 $ 6.26 $ 9.13 $ 12.01 $ 14.97 $ 18.15 $ 21.72 $ 26.17 $ 30.01 $ 35.44 $ 39.66 $ 44.38
Terminal Value $ 214.14
Incremental free cash $ $ (8.34) $ (8.46) $ (3.50) $ (1.83) $ 0.51 $ 1.99 $ 4.93 $ 8.65 $ 10.80 $ 13.73 $ 18.56 $ 235.27
flow (12.15)
Cash flow differential $ 9.39) $ 15.78) $ 15.58) $ (9.23) $ (8.36) $ 11.02) $ (5.53) $ 2.09 $ 15.65 $ 24.14 $ 21.69 $ 38.60 $ 323.46