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Model Facts

This spreadsheet supports STUDENT analysis of the case, "Diamond


Chemicals (A)" (UVA-F-1351 v. 1.4).
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.

Copyright (C) 2001 by the Trustees of the University of Virginia Darden School Foundation.

Page 1

Model Facts

chool Foundation.

Page 2

Exhibit 2

UVA-F-1351

DIAMOND CHEMICALS (A)

Frank Greystock'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

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
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
After-tax Scrap Proceeds
8. Free Cash Flow
NPV =
IRR =

250,000
7.0%
541
0.0%
12.50%
11.5%
30.0%
9.00
1.25%
0.8%
0.0%
1
2001

Discount rate
Depreciable Life (years)
Overhead/Investment
Salvage Value
WIP Inventory/Cost of Goods
Months Downtime, Construction
After-tax Scrap Proceeds
Preliminary Engineering Costs

2
2002

3
2003

250,000
135.25
15.55
3.62

250,000
135.25
15.55
2.54

250,000
135.25
15.55
2.54

250,000
135.25
15.55
2.54

250,000
135.25
15.55
2.54

250,000
135.25
15.55
2.54

1.20
0.32
0.50
-0.16
-0.05

1.04
0.32

0.90
0.32

0.78
0.32

0.68
0.32

0.59
0.32

0.51
0.32

0.44
0.32

0.38
0.32

0.33
0.32

0.43
0.32

0.43
0.32

0.43
0.32

0.43
0.32

0.43
0.32

2.99
0.90

3.13
0.94

3.25
0.97

3.35
1.01

2.72
0.82

2.80
0.84

2.87
0.86

2.92
0.88

2.98
0.89

1.79
0.54

1.79
0.54

1.79
0.54

1.79
0.54

1.79
0.54

-0.11

2.09

2.19

2.27

2.35

1.90

1.96

2.01

2.05

2.08

1.25

1.25

1.25

1.25

1.25

1.20
0.31
0.00

1.04
-0.47

0.90
0.00

0.78
0.00

0.68
0.00

0.59
0.00

0.51
0.00

0.44
0.00

0.38
0.00

0.33
0.00

0.43
0.00

0.43
0.00

0.43
0.00

0.43
0.00

0.43
0.00

1.40

2.66

3.09

3.06

3.02

2.49

2.47

2.45

2.43

2.41

1.68

1.68

1.68

1.68

1.68

144.72
12.5%
18.09

267,500

15
2015

250,000
135.25
15.55
3.62

144.72
12.5%
18.09

267,500

14
2014

250,000
135.25
15.55
3.62

144.72
12.5%
18.09

267,500

13
2013

250,000
135.25
15.55
3.62

144.72
13.3%
19.18

267,500

12
2012

250,000
135.25
15.55
3.62

144.72
13.3%
19.18

267,500

11
2011

250,000
135.25
15.55
4.34

144.72
13.3%
19.18

267,500

10
2010

250,000
135.25
15.55
4.34

144.72
13.3%
19.18

267,500

9
2009

250,000
135.25
15.55
4.34

144.72
13.3%
19.18

267,500

8
2008

250,000
135.25
15.55
4.34

144.72
13.8%
19.90

267,500

7
2007

250,000
135.25
15.55
1.86

144.72
13.8%
19.90

267,500

6
2006

267,500

144.72
13.8%
19.90

267,500

5
2005

<== Note that discount rate should be set to 10 % for


exact comparability to case exhibit.

267,500
(33,438)
126.63
13.8%
17.41

144.72
13.8%
19.90

267,500

4
2004

10.0%
15
3.5%
0
3.0%
1.5
0
0.5

144.72
12.5%
18.09

267,500
144.72
12.5%
18.09

-9.00

-9.00
9.00
25.9%