Victoria Chemicals Plc a free essay sample

On another note, Griffin Tewitt, assistant plant manager and Morris’s direct subordinate, Proposed that Greystock modify his proposal to include a renovation of the EPC production line at a cost of GBP1 million. He believed that the renovation would give Victoria Chemicals the lowest EPC cost base in the world and would improve cash flows by GBP25, 000. The NPV of  this project was GBP750, 000, which Tewitt argued that the negative NPV ignored strategic advantages from the project and increases in volume and prices when the recession ended. The purchase was estimated at GBP2 million in 2010. Rolling stock would have a depreciable life of 10 years, but could operate much longer with proper maintenance. The rolling stock also could not be used outside of Britain because of differences in track gauges, which meant that the trucks could not be used to ship product to its primary customers in the Middle East. The Transport Division believed that the cost of the tank cars should be included in the initial outlay of Merseyside Works’ capital program. We will write a custom essay sample on Victoria Chemicals Plc a or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page However, Greystock disagreed, noting that they were doing the company a favor by using the excess capacity and that company has always operated in silos. As such Greystock did not include the charge (cost of excess rolling stock) in the proposal on the grounds that the division should carry the allocation of rolling stock. The Merseyside project is attractive with some criteria. The entire industry was experiencing a downturn. The company increased their outputs in renovation times. Now they can do oversupply of polypropylene. Merseyside gives an opportunity to cannibalize the competitor company which is Rotterdam . Merseyside project allows Victoria Chemicals to compete better with other producer of polypropylene and thus win over customers from competitors. But when we take a look at this project we thought that Luky Morris should ask Greystock about his DCF : how about loses in renovating time because Greystock did not analyze how much they lost in that time period. Also they make discount on their price in order to cannibalize their competitor. He should ask him how they can cover their lost in budget with this new lower price.