American Chemical Corporation Analysis
Executive Summary
American Chemical Corporation’s Collinsville plant in Alabama is being sought by Dixon a speciality chemicals company. This plant mainly specialises in Sodium Chlorate production and fits well with Dixon’s strategy of supplying chemicals to paper and pulp industry. It would also complement Dixon’s existing product line. The plant costs $12million in investment and requires up to$ 2.25 million for upgrading to new technology.
An in-depth investigation and analysis is conducted for both the company and the industry to accurately determine the worth of investment in the Collinsville plant. Net present values are calculated for all possible scenarios. After a thorough analysis of the data, suitable recommendations are provided.
Table of Contents Executive Summary 2 Introduction 4 About The Collinsville Plant 4 Sodium Chlorate Market in USA 4 Issues surrounding Collinsville opportunity 5 Valuation 5 Using NPV Rule for the project – Without Laminated Electrodes 6 Using NPV Rule for the project – With Laminated Electrodes 6 Calculations of Beta 7 Debt/Equity ratio 7 Monte Carlo Analysis 7 For the Unlaminated factory 7 Recommendations 8 Exhibits 9 Exhibit 1: Using NPV Rule for the project – Without Laminated Electrodes (Full Table) 9 Exhibit 2: Using NPV Rule for the project – With Laminated Electrodes (Full Table) 10
Introduction
Dixon, an American specialty chemical producer, wants to buy Collinsville plant from American Chemical Corporation, another typical chemical company in 1979. Dixon wants to diversify its product line by acquiring the aforesaid plant, which produces sodiumchlorate to supply to paper producers in South-eastern part of the US. This plant initially cost USD 12 million and additional USD 2.25 million needed to buy laminate technology to increase efficiency and profitability of the plant in order.
About The Collinsville Plant
American Chemical Corporation’s plant in Collinsville had the
American Chemical Corporation’s Collinsville plant in Alabama is being sought by Dixon a speciality chemicals company. This plant mainly specialises in Sodium Chlorate production and fits well with Dixon’s strategy of supplying chemicals to paper and pulp industry. It would also complement Dixon’s existing product line. The plant costs $12million in investment and requires up to$ 2.25 million for upgrading to new technology.
An in-depth investigation and analysis is conducted for both the company and the industry to accurately determine the worth of investment in the Collinsville plant. Net present values are calculated for all possible scenarios. After a thorough analysis of the data, suitable recommendations are provided.
Table of Contents Executive Summary 2 Introduction 4 About The Collinsville Plant 4 Sodium Chlorate Market in USA 4 Issues surrounding Collinsville opportunity 5 Valuation 5 Using NPV Rule for the project – Without Laminated Electrodes 6 Using NPV Rule for the project – With Laminated Electrodes 6 Calculations of Beta 7 Debt/Equity ratio 7 Monte Carlo Analysis 7 For the Unlaminated factory 7 Recommendations 8 Exhibits 9 Exhibit 1: Using NPV Rule for the project – Without Laminated Electrodes (Full Table) 9 Exhibit 2: Using NPV Rule for the project – With Laminated Electrodes (Full Table) 10
Introduction
Dixon, an American specialty chemical producer, wants to buy Collinsville plant from American Chemical Corporation, another typical chemical company in 1979. Dixon wants to diversify its product line by acquiring the aforesaid plant, which produces sodiumchlorate to supply to paper producers in South-eastern part of the US. This plant initially cost USD 12 million and additional USD 2.25 million needed to buy laminate technology to increase efficiency and profitability of the plant in order.
About The Collinsville Plant
American Chemical Corporation’s plant in Collinsville had the