Merseyside

Model Facts
ECTN.XLS
This spreadsheet supports INSTRUCTOR analysis of the cases,
"Empirical Chemicals (A) & (B)" (UVA -F-1020 and 1021 v. 2.3).
Please note:
1) This is a working model. Assumptions / Inputs presented can be
changed to vary the results.
2) As long as default spreadsheet calculation is "automatic" the impact
of changing assumptions will be computed in real time. If calculation is
set as "manual" you should press the F9 function key to
recalculate results. To set numerical calculation settings to automatic
look under tools, options, calculations menu.
Revised: 3-Jun-98
Copyright (C) 1998 by the Trustees of the University of Virginia Darden School Foundation.
Page 1
DISCOUNTED CASH FLOW COMPARISON

DCF Results of Base Cases (MM Pounds Sterling)
No Erosion
Full Erosion
Other, Original
Where
TN:
"Memo"
TN: Exh.
TN2
Merseyside
Rotterdam,
Excludes
Right-of-Way
Case
6.07
5.67
DCF (base case)
IRR
21.6%
16.7%
WACC Base Case
9.0%
9.0%
6.07
5.67
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
18.0%
19.0%
20.0%
N.B.: Grey highlights region of "crossover".
Source: Casewriter analysis.
TN:
"Memo"
Merseyside
2.62
14.9%
9.0%
2.62
4.56
3.86
3.21
2.62
2.08
1.59
1.13
0.71
0.32
-0.04
-0.38
-0.69
-0.98
-1.24
-1.50
(A) Case,
Exhibit 2
Rotterdam,
Excludes
Right-of-Way
3.17
13.5%
9.0%
3.17
6.47
5.24
4.15
3.17
2.31
1.54
0.86
0.25
-0.29
-0.77
-1.20
-1.58
-1.93
-2.23
-2.50
Yes, Erosion
Rott.
Mersey
6.0%
6.47
4.56
7.0%
5.24
3.86
8.0%
4.15
3.21
9.0%
3.17
2.62
10.0%
2.31
2.08
11.0%
1.54
1.59
12.0%
0.86
1.13
13.0%
0.25
0.71
14.0%
-0.29
0.32
15.0%
-0.77
-0.04
16.0%
-1.20
-0.38
17.0%
-1.58
-0.69
18.0%
-1.93
-0.98
19.0%
-2.23
-1.24
20.0%
-2.50
-1.50
(B) Case,
Exhibit 1
Rotterdam,
Rotterdam,
Merseyside, Original With Original With
Original Not Right-of-Way, Right-of-Way
Revised
No Erosion and Erosion
2.36
19.2%
13.0%
4.64
6.97
6.12
5.35
4.64
4.00
3.41
2.86
2.36
1.90
1.47
1.08
0.71
0.37
0.05
-0.24
12.28
17.2%
9.0%
12.28
21.24
17.84
14.87
12.28
10.00
8.01
6.26
4.71
3.36
2.16
1.10
0.16
-0.67
-1.40
-2.05
NPV of Projects by Discount Rate

(No Erosion at Other Plant)
(B) Case,
Exhibit 1
10.85
16.8%
9.0%
10.85
19.42
16.17
13.33
10.85
8.68
6.78
5.12
3.65
2.37
1.24
0.24
-0.64
-1.42
-2.11
-2.71
12.00
10.00
8.00
NPV6.00
4.00
2.00
0.00
Merseyside
Rotterdam
Discount Rate
NPV of Projects by Discount Rate

With Erosion at other Plant
8.00
6.00
4.00
NPV2.00
Rotterdam
Merseyside
0.00
-2.00
-4.00
Discount Rate
Exhibit 2
VA-F-1020
EMPIRICAL CHEMICALS (A)
Jim Hawkin's DCF Analysis of 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
Investment Outlay (mill.)
Energy Savings/Sales
Yr. 1-5
Yr. 6-10
Yr. 11-15
135,000
7.0%
611
0.0%
12.90%
11.5%
35.0%
7.00
1.0%
0.5%
0.0%
1
Year
Now
1992
1. Estimate of Incremental Gross Profit
New Output (tons)
144,450
Lost Output--Construction
(22,500)
New Sales (Millions)
74.51
New Gross Margin
13.9%
New Gross Profit
10.36
Old Output
Old Sales
Old Gross Profit
Incremental Gross Profit
7. After-tax Profit
8. Cash Flow Adjustments
Less Capital Expendi
-7.00
Add back Depreciation
Less Added WIP inventory
After-tax Scrap Proceeds
-7.00
8. Free Cash Flow
NPV =
IRR =
4.64
19.2%
9.0%
15
3.5%
0
3.0%
2
0
0.5
2
1993
3
1994
4
1995
5
1996
6
1997
7
1998
8
1999
9
2000
10
2001
11
2002
12
2003
13
2004
14
2005
15
2006
144,450
144,450
144,450
144,450
144,450
144,450
144,450
144,450
144,450
144,450
144,450
144,450
144,450
144,450
88.26
13.9%
12.27
88.26
13.9%
12.27
88.26
13.9%
12.27
88.26
13.9%
12.27
88.26
13.4%
11.83
88.26
13.4%
11.83
88.26
13.4%
11.83
88.26
13.4%
11.83
88.26
13.4%
11.83
88.26
12.9%
11.39
88.26
12.9%
11.39
88.26
12.9%
11.39
88.26
12.9%
11.39
88.26
12.9%
11.39
135,000
82.49
9.49
2.78
135,000
82.49
9.49
2.78
135,000
82.49
9.49
2.78
135,000
82.49
9.49
2.78
135,000
82.49
9.49
2.34
135,000
82.49
9.49
2.34
135,000
82.49
9.49
2.34
135,000
82.49
9.49
2.34
135,000
82.49
9.49
2.34
135,000
82.49
9.49
1.90
135,000
82.49
9.49
1.90
135,000
82.49
9.49
1.90
135,000
82.49
9.49
1.90
135,000
82.49
9.49
1.90
0.93
0.25
0.50
-0.81
-0.28
0.81
0.25
0.70
0.25
0.61
0.25
0.53
0.25
0.46
0.25
0.40
0.25
0.34
0.25
0.32
0.25
0.32
0.25
0.32
0.25
0.32
0.25
0.32
0.25
0.32
0.25
0.32
0.25
1.73
0.60
1.84
0.64
1.93
0.68
2.01
0.70
1.64
0.57
1.70
0.60
1.75
0.61
1.78
0.62
1.78
0.62
1.33
0.47
1.33
0.47
1.33
0.47
1.33
0.47
1.33
0.47
-0.52
1.12
1.19
1.25
1.31
1.07
1.11
1.14
1.15
1.15
0.87
0.87
0.87
0.87
0.87
0.93
0.27
0.00
0.81
-0.36
0.70
0.00
0.61
0.00
0.53
0.00
0.46
0.00
0.40
0.00
0.34
0.00
0.32
0.00
0.32
0.00
0.32
0.00
0.32
0.00
0.32
0.00
0.32
0.00
0.32
0.00
1.58
1.89
1.86
1.83
1.52
1.50
1.48
1.47
1.47
1.19
1.19
1.19
1.19
1.19
135,000
82.49
9.49
0.87
2. Estimate of Incremental Depreciation

New Depreciation
3. Overhead
4. Prelim. Engineering Costs
5. Pretax Incremental Profit
6. Tax Expense
Discount rate
Depreciable Life (years)
Overhead/Investment
Salvage Value
WIP Inventory/Cost of Goods
Months Downtime, Construction
Preliminary Engineering Costs
0.67
Exhibit 1
VA-F-1021
EMPIRICAL CHEMICALS (B)
ANALYSIS OF ROTTERDAM PROJECT

(Values in British Pounds)
Assumptions
135,000
Output Gain Per Year/Prior Year
2.0%
Maximum Possible Output
144,450
611
Inflation (prices and costs)
0.0%
Gross Margin Growth Rate/Year
0.80%
Maximum Possible Gross Margin
16.5%
Old Gross Margin
11.5%
Tax Rate
35.0%
Investment Outlay (millio Now
3
End, 1992
2
1993
1.5
1994
1
Setup and Labor Savings/Sales (yr.1)

Discount rate
Overhead/Investment
Salvage Value
WIP Inventory/Cost of Goods Sold
Terminal Value of Right-of-Way
1992
1993
1994
1995
0.0%
9.0%
15
3.5%
0
3.0%
35
5
4
3
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Year
Now
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
New Output
137,700 140,454 143,263 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450
(57,375) (46,818) (35,816)
0
49.08
57.21
65.65
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
New Gross Margin
11.6%
11.8%
12.1%
12.5%
13.0%
13.6%
14.4%
15.3%
16.5%
16.5%
16.5%
16.5%
16.5%
16.5%
16.5%
New Gross Profit
5.69
6.74
7.92
10.99
11.44
12.00
12.69
13.52
14.53
14.56
14.56
14.56
14.56
14.56
14.56
Old Output
135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000
Old Sales
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
Old Gross Profit
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
-3.80
-2.75
-1.57
1.51
1.95
2.51
3.20
4.04
5.04
5.08
5.08
5.08
5.08
5.08
5.08
Yr. 1 Outlays
0.27
0.23
0.20
0.17
0.15
0.13
0.11
0.10
0.10
0.09
0.09
0.09
0.09
0.09
0.09
Yr. 2 Outlays
0.21
0.18
0.16
0.13
0.12
0.10
0.08
0.08
0.08
0.07
0.07
0.07
0.07
0.07
Yr. 3 Outlays
0.15
0.13
0.11
0.09
0.08
0.07
0.06
0.06
0.05
0.05
0.05
0.05
0.05
Total, New Depreciation
0.27
0.45
0.54
0.46
0.40
0.34
0.29
0.25
0.24
0.23
0.21
0.21
0.21
0.21
0.21
3. Overhead
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-4.06
-3.19
-2.10
1.04
1.56
2.17
2.91
3.79
4.80
4.85
4.87
4.87
4.87
4.87
4.87
5. Tax Expense
-1.42
-1.12
-0.74
0.37
0.54
0.76
1.02
1.33
1.68
1.70
1.70
1.70
1.70
1.70
1.70
6. After-tax Profit
-2.64
-2.08
-1.37
0.68
1.01
1.41
1.89
2.46
3.12
3.15
3.16
3.16
3.16
3.16
3.16
0.27
0.45
0.54
0.46
0.40
0.34
0.29
0.25
0.24
0.23
0.21
0.21
0.21
0.21
0.21
Less added WIP inventory
0.89
-0.21
-0.22
-0.59
0.01
0.02
0.02
0.03
0.03
0.00
0.00
0.00
0.00
0.00
0.00
Capital Spending
3.00
2.00
1.50
1.00
Terminal Value, land
35.00
8. Free Cash Flow
-3.00
-5.26
-2.92
-1.61
1.73
1.39
1.74
2.16
2.69
3.33
3.38
3.37
3.37
3.37
3.37
38.37
DCF, Rotterdam =
12.28
IR, Rotterdam =
17.2%
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
(1.43)
DCF, Rotterdam Adjusted for Full
Erosion at Merseyside =
10.85
9,450
5.77
0.66
0.43
0.17
(0.26)
9,450
5.77
0.66
0.43
0.17
(0.26)
9,450
5.77
0.66
0.43
0.17
(0.26)
9,450
5.77
0.66
0.43
0.17
(0.26)
9,450
5.77
0.66
0.43
0.17
(0.26)
9,450
5.77
0.66
0.43
0.17
(0.26)
9,450
5.77
0.66
0.43
0.17
(0.26)
9,450
5.77
0.66
0.43
0.17
(0.26)
9,450
5.77
0.66
0.43
0.17
(0.26)
9,450
5.77
0.66
0.43
0.17
(0.26)
9,450
5.77
0.66
0.43
0.17
(0.26)
9,450
5.77
0.66
0.43
0.17
(0.26)
Merseyside Proposal: Part A

(Reflects charge for full erosion
of Rotterdam business volume)
Assumptions
Old Gross Margin
Tax Rate
Investment Outlay (mill.) - Plant
Investment in Tank Cars
Energy Savings/Sales Yr. 1-5
Yr. 6-10
Yr. 11-15
Year
135,000
7.0%
611.00
0.0%
12.9%
11.5%
35.0%
7
2.0
1.0%
0.5%
0.0%
1
1992
Now
Discount rate
Depreciable Life (years) Plant
Depreciable Life (yrs.) Tank Cars
Overhead/Investment
Salvage Value
WIP Inventory/Cost of Goods
2
1993
3
1994
4
1995
5
1996
9.0%
15
10
3.5%
0
3.0%
2
0
6
1997
7
1998
8
1999
9
2000
10
2001
11
2002
12
2003
13
2004
14
2005
15
2006

New Output
144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450
(22,500)
74.51
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
New Gross Margin
13.9%
13.9%
13.9%
13.9%
13.9%
13.4%
13.4%
13.4%
13.4%
13.4%
12.9%
12.9%
12.9%
12.9%
12.9%
New Gross Profit
10.36
12.27
12.27
12.27
12.27
11.83
11.83
11.83
11.83
11.83
11.39
11.39
11.39
11.39
11.39
Old Output
Old Sales
Old Gross Profit
135,000
82.49
9.49
135,000
82.49
9.49
135,000
82.49
9.49
135,000
82.49
9.49
135,000
82.49
9.49
135,000
82.49
9.49
135,000
82.49
9.49
135,000
82.49
9.49
135,000
82.49
9.49
135,000
82.49
9.49
135,000
82.49
9.49
135,000
82.49
9.49
135,000
82.49
9.49
135,000
82.49
9.49
135,000
82.49
9.49
9,450
5.77
0.66
9,450
5.77
0.66
9,450
5.77
0.66
9,450
5.77
0.66
9,450
5.77
0.66
9,450
5.77
0.66
9,450
5.77
0.66
9,450
5.77
0.66
9,450
5.77
0.66
9,450
5.77
0.66
9,450
5.77
0.66
9,450
5.77
0.66
9,450
5.77
0.66
9,450
5.77
0.66
9,450
5.77
0.66
0.21
2.12
2.12
2.12
2.12
1.68
1.68
1.68
1.68
1.68
1.24
1.24
1.24
1.24
1.24
0.93
0.81
0.70
0.40
0.61
0.32
0.93
0.81
1.10
0.93
0.53
0.26
0.40
0.38
0.46
0.20
0.32
0.34
0.40
0.16
0.26
0.30
0.34
0.13
0.20
0.27
0.32
0.13
0.16
0.29
0.32
0.13
0.13
0.32
0.32
0.13
0.13
0.32
0.32
0.13
0.13
0.32
0.32
0.00
0.13
0.19
0.32
0.00
0.13
0.19
0.32
0.00
0.00
0.32
-0.73
-0.25
-0.47
1.31
0.46
0.85
1.02
0.36
0.66
1.19
0.42
0.77
1.74
0.61
1.13
1.34
0.47
0.87
1.37
0.48
0.89
1.41
0.49
0.92
1.39
0.49
0.90
1.36
0.48
0.88
0.92
0.32
0.60
0.92
0.32
0.60
1.05
0.37
0.68
1.05
0.37
0.68
0.92
0.32
0.60
0.93
0.81
1.10
0.93
0.38
0.34
0.30
0.27
0.29
0.32
0.32
0.32
0.19
0.19
0.32
0.27
-0.27
-0.36
0.36
0.00
0.00
-2.00
0.00
0.00
0.00
0.00
2.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.09
-0.09
0.46
1.66
-0.24
1.70
3.51
1.21
1.20
1.18
1.19
1.20
0.92
0.92
0.87
0.87
0.92
Lost Rotterdam Output (MT)

Lost Revenue
Lost Rotterdam Gross Profit
+ New Depreciation, Plant
+ New Depreciation,Tank Cars
- Old Depreciation, Tank Cars
Total Change in Depreciation
4. Tax Expense
5. After-tax Profit
Change in WIP Inventory
At Merseyside
At Rotterdam
Capital Investment
7. Free Cash Flow
-7.00
NPV =
IRR =
14.9%
-7.00
2.62
0.00
Merseyside Proposal: Part B

(Reflects no charge for erosion
of Rotterdam business volume)
Assumptions
Old Gross Margin
Tax Rate
Investment Outlay (mill.) - Plant
Investment in Tank Cars
Energy Savings/Sales Yr. 1-5
Yr. 6-10
Yr. 11-15
135,000
7.0%
611
0.0%
12.9%
11.5%
35.0%
7
2
1.0%
0.5%
0.0%
Discount rate
Depreciable Life (years) Plant
Depreciable Life (yrs.) Tank Cars
Overhead/Investment
Salvage Value
9.0%
15
10
3.5%
0.0%
3.0%
2
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Year
Nos
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
New Output
144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450
(22,500)
74.51
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
New Gross Margin
13.9%
13.9%
13.9%
13.9%
13.9%
13.4%
13.4%
13.4%
13.4%
13.4%
12.9%
12.9%
12.9%
12.9%
12.9%
New Gross Profit
10.36
12.27
12.27
12.27
12.27
11.83
11.83
11.83
11.83
11.83
11.39
11.39
11.39
11.39
11.39
Old Output
Old Sales
Old Gross Profit
+ New Depreciation-Plant
+ New Depreciation, Tank Cars
- Old Depreciation, Tank Cars
Total Change in Depreciation
5. Tax Expense
6. After-tax Profit
Added WIP inventory
Capital Investment
8. Free Cash Flow
-7.00
DCF =
IRR =
21.6%
135,000
82.49
9.49
0.87
135,000
82.49
9.49
2.78
135,000
82.49
9.49
2.78
135,000
82.49
9.49
2.78
135,000
82.49
9.49
2.78
135,000
82.49
9.49
2.34
135,000
82.49
9.49
2.34
135,000
82.49
9.49
2.34
135,000
82.49
9.49
2.34
135,000
82.49
9.49
2.34
135,000
82.49
9.49
1.90
135,000
82.49
9.49
1.90
135,000
82.49
9.49
1.90
135,000
82.49
9.49
1.90
135,000
82.49
9.49
1.90
0.93
0.81
0.70
0.40
0.61
0.32
0.93
0.81
1.10
0.93
0.53
0.26
0.40
0.38
0.46
0.20
0.32
0.34
0.40
0.16
0.26
0.30
0.34
0.13
0.20
0.27
0.32
0.13
0.16
0.29
0.32
0.13
0.13
0.32
0.32
0.13
0.13
0.32
0.32
0.13
0.13
0.32
0.32
0.00
0.13
0.19
0.32
0.00
0.13
0.19
0.32
0.00
0.00
0.32
-0.06
-0.02
-0.04
1.97
0.69
1.28
1.68
0.59
1.09
1.85
0.65
1.21
2.40
0.84
1.56
2.00
0.70
1.30
2.04
0.71
1.32
2.07
0.73
1.35
2.05
0.72
1.34
2.02
0.71
1.31
1.58
0.55
1.03
1.58
0.55
1.03
1.71
0.60
1.11
1.71
0.60
1.11
1.58
0.55
1.03
0.93
0.27
0.81
-0.36
1.10
0.00
-2.00
0.93
0.00
0.38
0.00
2.00
0.34
0.00
0.30
0.00
0.27
0.00
0.29
0.00
0.32
0.00
0.32
0.00
0.32
0.00
0.19
0.00
0.19
0.00
0.32
0.09
1.74
0.19
2.13
3.94
1.64
1.63
1.62
1.62
1.63
1.35
1.35
1.30
1.30
1.44
-7.00
6.07
0.00
1.16
Exh. TN2
Exhibit TN2
-F-1020TN
EMPIRICAL CHEMICALS (TN)
ANALYSIS OF ROTTERDAM PROJECT

Excluding Impact of the Right-of-Way Investment
(Financial values in millions of British Pounds)
Assumptions

135,000
Setup and Labor Savings/Sales (yr.1)
0.0%
Output Gain Per Year/Prior Year
2.0%
Discount rate
9.0%
Maximum Possible Output
144,450
15
611
Overhead/Investment
3.5%
0.0%
Salvage Value
0
Gross Margin Growth Rate Per Year
0.80%
3.0%
Maximum Possible Gross Margin
16.5%
Terminal Value of Right-of-Way
0
Old Gross Margin
11.5%
1992
5
Tax Rate
35.0%
1993
4
Investment Outlay (millions) Now
0
1994
3
End, 1992
2
1995
0
1993
1.5
1994
1
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Year
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
New Output
137,700 140,454 143,263 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450 144,450
(57,375) (46,818) (35,816)
0
49.08
57.21
65.65
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
88.26
New Gross Margin
11.6%
11.8%
12.1%
12.5%
13.0%
13.6%
14.4%
15.3%
16.5%
16.5%
16.5%
16.5%
16.5%
16.5%
16.5%
New Gross Profit
5.69
6.74
7.92
10.99
11.44
12.00
12.69
13.52
14.53
14.56
14.56
14.56
14.56
14.56
14.56
Old Output
135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000
Old Sales
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
82.49
Old Gross Profit
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
9.49
-3.80
-2.75
-1.57
1.51
1.95
2.51
3.20
4.04
5.04
5.08
5.08
5.08
5.08
5.08
5.08
Yr. 1 Outlays
0.27
0.23
0.20
0.17
0.15
0.13
0.11
0.10
0.10
0.09
0.09
0.09
0.09
0.09
0.09
Yr. 2 Outlays
0.21
0.18
0.16
0.13
0.12
0.10
0.08
0.08
0.08
0.07
0.07
0.07
0.07
0.07
Yr. 3 Outlays
0.15
0.13
0.11
0.09
0.08
0.07
0.06
0.06
0.05
0.05
0.05
0.05
0.05
Total, New Depreciation
0.27
0.45
0.54
0.46
0.40
0.34
0.29
0.25
0.24
0.23
0.21
0.21
0.21
0.21
0.21
3. Overhead
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-4.06
-3.19
-2.10
1.04
1.56
2.17
2.91
3.79
4.80
4.85
4.87
4.87
4.87
4.87
4.87
5. Tax Expense
-1.42
-1.12
-0.74
0.37
0.54
0.76
1.02
1.33
1.68
1.70
1.70
1.70
1.70
1.70
1.70
6. After-tax Profit
-2.64
-2.08
-1.37
0.68
1.01
1.41
1.89
2.46
3.12
3.15
3.16
3.16
3.16
3.16
3.16
0.27
0.45
0.54
0.46
0.40
0.34
0.29
0.25
0.24
0.23
0.21
0.21
0.21
0.21
0.21
Less added WIP inventory
0.89
-0.21
-0.22
-0.59
0.01
0.02
0.02
0.03
0.03
0.00
0.00
0.00
0.00
0.00
0.00
Capital Spending
0.00
2.00
1.50
1.00
Terminal Value, land
8. FCF, Zero Erosion
0.00
-5.26
-2.92
-1.61
1.73
1.39
1.74
2.16
2.69
3.33
3.38
3.37
3.37
3.37
3.37
3.37
5.67
DCF, no erosion =
IRR, no erosion =
16.7%
9. Adjustment for full erosion in Merseyside volume:
Lost Merseyside Output
Lost Merseyside Revenue
Lost Merseyside Gross Profits
Lost Gross Profits after Taxes
Change in Merseyside Inventory
0.00
Total Effect on Free Cash Fl
DCF Erosion Effect
(2.50)
10. Free Cash flows of Rotterdam
After erosion:
0.00
-5.26
DCF of Rotterdam Project Adjusted for Full Erosion
at Merseyside =
3.17
IRR, full erosion =
13.5%
0.00
-
0.00
-
9,450
5.77
0.66
0.43
-0.15
(0.58)
9,450
5.77
0.66
0.43
0.00
(0.43)
9,450
5.77
0.66
0.43
0.00
(0.43)
9,450
5.77
0.66
0.43
0.00
(0.43)
9,450
5.77
0.66
0.43
0.00
(0.43)
9,450
5.77
0.66
0.43
0.00
(0.43)
9,450
5.77
0.66
0.43
0.00
(0.43)
9,450
5.77
0.66
0.43
0.00
(0.43)
9,450
5.77
0.66
0.43
0.00
(0.43)
9,450
5.77
0.66
0.43
0.00
(0.43)
9,450
5.77
0.66
0.43
0.00
(0.43)
9,450
5.77
0.66
0.43
0.00
(0.43)
-2.92
-1.61
1.14
0.96
1.30
1.73
2.25
2.90
2.95
2.94
2.94
2.94
2.94
2.94
Page 7
17

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Model Facts

DISCOUNTED CASH FLOW COMPARISON

NPV of Projects by Discount Rate

NPV of Projects by Discount Rate

EMPIRICAL CHEMICALS (A)

Jim Hawkin's DCF Analysis of Merseyside Project

2. Estimate of Incremental Depreciation

EMPIRICAL CHEMICALS (B)

ANALYSIS OF ROTTERDAM PROJECT

Setup and Labor Savings/Sales (yr.1)

Merseyside Proposal: Part A

1. Estimate of Incremental Gross Profit

Lost Rotterdam Output (MT)

Merseyside Proposal: Part B

EMPIRICAL CHEMICALS (TN)

ANALYSIS OF ROTTERDAM PROJECT

Annual Output (metric tons)

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