annum based on the cost $.019 per KWH in 77’ to $.025 per KWH in 79’. To be conservative we will take the 12% projection made by Dixon. Based on the historical average and
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Bus M 401 Dixon Case Estimate of WACC for Collinsville Plant The WACC for Collinsville‚ according to our estimations‚ came up to about 16.22% (Exhibit I). We took the average of the unlevered betas of comparable companies‚ 0.91‚ and relevered it according to Dixon’s target capital structure. Dixon’s 5-year historical debt ratio was 27.5%‚ but this approach would not be reliable due to its steep downturn debt ratio from 51% in 1975 to 6% in 1979. Thus‚ we thought that the best estimate of the
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Case Two Analysis Dixon Corporation: The Collinsville Plant Paul Candland & Lynn Chang October 1‚2013 WACC Calculation In order to calculate WACC‚ we need to first start with the beta of equity. We are given the beta of equity of 1.06 of Dixon as a firm in Exhibit 7. However‚ the beta given is not an appropriate measure of the systematic risk of the Collinsville Plant‚ because Dixon produces many other chemical products other than Sodium Chlorate. Therefore‚ in order to accurately capture
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Caso DIXON Finanzas Corportativas Integrantes • Hugo Rangel • Alvaro Rojas • Javier Rota • Javier Seminario 1. Estimate the cost of equity appropriate for the evaluation of the incremental cash flows associated with the Collinsville investment. Estimate the weighted average cost of capital appropriate for discounting the Collinsville plant’s incremental cash flows a) Usando los β de Burnswick y Southern‚ hallamos el βE desapalancado de Collinsville. Southern Chem. βA= βD(D/V)+βE(E/V)
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Bilal Al- Qureshi‚ Said Business School‚ University of Oxford 2010 American Chemical Corporation HBS Case Number: 9-290-102 Executive Summary The American Chemical Corporation (AMC) is a large‚ diversified chemical producer. In 1979‚ AMC was forced to issue a tender to sell a Sodium Chlorate plant‚ near Collinsville‚ Alabama. Dixon‚ a specialty chemicals company‚ was willing to purchase the aforementioned plant for $12m with the option to invest a further $2.25m on laminate technology. The
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Introduction: 1) This report considers the potential purchase of the sodium chlorate producing plant in Collinsville‚ Alabama by Dixon Corporation from American Chemical Corporation in October 1979. The reason for this stems from the fact that American Chemical Corporation was attempting at the time to buy a controlling stake in Universal Paper Corporation‚ but the management of Universal contested this on the basis that it would be anti-competitive‚ given that they were both producers of sodium
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and WACC is 12.01%. Calculation of NPVs Table 2 and Table 3 show the next 10 years cash flow of the Collinsville Plant without and with laminated graphite electrodes. Using the calculated WACC as the discount rate‚ the NPVs results are approximately -1.1 million without laminated electrodes and 10.3 million with laminated electrodes. According to the NPV calculated from DCF‚ the Collinsville proposal with laminated graphite electrodes looks much more attractive than without them. Issues beyond
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Applied Corporate Finance Case: American Chemical Corporation The primary issue we are exploring here is the planned sale of the Collinsville Plant by American Chemical Corporation to Dixon at a negotiated price of $ 12 Million (as of end of year ‘79) Q1: Estimate the appropriate cost of capital for the investment To calculate the appropriate cost of capital we assessed Dixon’s purchase investment structure. The steps were as follows: 1. We first calculated the cost of debt of the investment using
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Case: AMERICAN CHEMICAL CORPORATION 1. Executive Summary 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 buy acquiring the aforesaid plant‚ which produces sodium-chlorate to supply to paper producers in Southeastern part of the US. This plant initially cost 12 mln. USD and additional 2‚25 mln. USD needed to buy laminate technology to increase efficiency
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of 1979‚ the American Chemical Corporation (ACC) began looking for a buyer for the Collinsville‚ Alabama plant after successfully acquiring 91% of the shares of Universal Paper Corporation. Dixon Corporation‚ a specialist chemical company with customers primarily in the paper and pulp industry agreed to the possibility of purchasing the Collinsville plant for $12 million. This purchase will diversify Dixon’s product line‚ adding the sodium chlorate chemical‚ produced at the Collinsville plant‚ needed
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