Diamond Chemicals PLC Harvard Case Solution & Analysis

1         Solution no: 2

1.1        Net Present Value and Internal Rate of Return Comparison

By removing the effects of the right-of-ways option, the result of the both projects is similar in nature but the finances are in the favor of Merseyside. This is because of the better result of the net present value, internal rate of return, payback period and expected earnings per share.  The Merseyside having more positive value as compare to Rotterdam in term of toady`s value. The Merseyside have 13.9 British pound net present value and Rotterdam have 10.61 British pound net present value. Furthermore the internal rate of return of Merseyside is 26.26 percent, while Rotterdam has 14.7 percent, which is almost 11 times decrease in their percentage. The Merseyside has the payback period less than 50% of the Rotterdam project. The right-of-ways is the option in shorter period the price fluctuated in most superior side or most inferior side. This is the best decision to neglect this option basically its work on the stock and debt source side of the finance and here purely needs the tactics of the capital budgeting. The organization is also making the term and condition of the project which is important in the calculation of valuations.  The comparison of the Merseyside and Rotterdam has given in the different headings and their reflections are also attached with it.

1.2        Positioning

Merseyside`s project is having good position with a comparison of Rotterdam project. The ranking is done on the basis of the analysis, which given in the excel sheet name as Merseyside and Rotterdam showing their relation of the capital expenditure with their cash flows. The first position goes to the Merseyside because of their sustainability of the project. These analyses also extract their efficiency with respect to the financial sources in reflecting the benefits of the finances. Moreover, the calculation is depicting the key features of the financial management and their understanding to build an effective curve line of the project in respect to the shorter period. For the understanding of the financial viability, then you should go to the excel sheet with different names of the four strategies, decision criteria which is also attached in this report appendix

1.3        Changes in their Nature and their Remarks

The nature of the changes is done in the form of comparison of the financial strength of the project. The comparative effects showing the better health of the finance of the Merseyside projects.The reason of these aspects as already discussed in the above paragraph. In the analysis of financial nature are changes due to the changes in the variables of the finance. The Merseyside has also a competitive edge with respect to the technological enhancement. These kinds of nature also give the reflections of return in this project. Furthermore, the company makes sure for all the aspects of the finance are working on consistency and give an optimal solution for the organization in both ways which financial and non-financial. The expected earnings per share of Merseyside are zero point zeros three British pounds with decrease with the erosion of the Merseyside. Moreover, Rotterdam has a lower value of the net inflows under finance expense. On the other hand, Rotterdam has a much lower value of the present values. Due to the all analysis, the recommendations are in the favor of Merseyside because of their potentiality of the financial ends

2         Solution no: 3

2.1   Problems of the Crossover and their effects

The problem with the word of crossover effects in which the internal rate of return problems. It shows that the position where zero inflow values with zero present value of capital expenditures. Basically, in the evaluation of the projects needs that point where they measure the high value of return from both proposals. Furthermore, the internal rate of return is not suitable for the calculation of project evaluation because it`s created a problem of the crossover which means that a certain point where the internal rate of return become positive and negative simultaneously. This is the reason for not relying with the techniques of internal rate of return. For the solution of this problem the company should use the method of profitability index (hereafter refer as PI) which giving the position ranking criteria of the project and extract the main essence of the investment opportunity. Moreover, the formula of PI is the sum of all present cash inflows/sum of all present value of cash outflows. These are the main essence of the crossover problems and their reflection on it.............................

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