This spreadsheet was prepared by Professor Michael J. Schill and Robert F. Bruner.

Copyright © 2008 by the University of Virgini

Charlottesville, VA. All rights reserved. For customer service inquiries, send an e-mail tosales@dardenbusinesspublishing.com. No pa
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Rev. Apr. 6, 2016

 This spreadsheet supports STUDENT analysis of the case “Victoria Chemicals PLC (B): The Merseyside and
Rotterdam Projects” (UVA-F-1544).

was prepared by Professor Michael J. Schill and Robert F. Bruner. Copyright © 2008 by the University of Virginia Darden School Foundation,
A. All rights reserved. For customer service inquiries, send an e-mail tosales@dardenbusinesspublishing.com. No part of this publication may be
in a retrieval system, posted to the Internet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or
the permission of the Darden School Foundation.
 Exhibit 1
VICTORIA CHEMICALS PLC (B): THE MERSEYSIDE AND ROTTERDAM PROJECTS
Analysis of Rotterdam Project (financial values in GBP millions)
Eustace

Assumptions
Annual Output (metric tons) 250,000 Shares outsating
Output Gain Per Year/Prior Year 2.0% Discount Rate 10.0% 92,891,240
Maximum Possible Output 267,500 Depreciable Life (years) 15
Price/Ton (pounds sterling) 675 Overhead/Investment 0.0%
Inflation (prices and costs) 0.0% Salvage Value 0
Gross Margin Growth Rate/Year 0.50% WIP Inventory/Cost of Goods Sold 3.0%
Maximum Possible Gross Margin 15.0% Terminal Value of Right-of-Way 40
Gross Margin 11.5% Months Downtime, Construction 2008 5
Tax Rate 30.0% 2009 4
Investment Outlay (millions) Now 3.5 2010 3
2008 5 2011 0
2009 1
2010 1

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Year Now 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
1. Estimate of Incremental Gross Profit
New Output (tons) 255,000 260,100 265,302 267,500 267,500 267,500 267,500 267,500 267,500 267,500 267,500 267,500 267,500 267,500
Lost Output—Construction (106,250) (86,700) (66,326)
New Sales (Millions) 100.41 117.05 134.31 180.56 180.56 180.56 180.56 180.56 180.56 180.56 180.56 180.56 180.56 180.56
New Gross Margin 11.5% 12.0% 12.5% 13.0% 13.5% 14.0% 14.5% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%
New Gross Profit 11.55 14.05 16.79 23.47 24.38 25.28 26.18 27.08 27.08 27.08 27.08 27.08 27.08 27.08

Old Output 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000
Old Sales 168.75 168.75 168.75 168.75 168.75 168.75 168.75 168.75 168.75 168.75 168.75 168.75 168.75 168.75
Old Gross Profit 19.41 19.41 19.41 19.41 19.41 19.41 19.41 19.41 19.41 19.41 19.41 19.41 19.41 19.41
Incremental Gross Profit (7.86) (5.36) (2.62) 4.07 4.97 5.87 6.78 7.68 7.68 7.68 7.68 7.68 7.68 7.68
2. Estimate of Incremental Depreciation
Yr. 1 Outlays 0.67 0.58 0.50 0.43 0.38 0.33 0.28 0.24 0.23 0.23 0.23 0.23 0.23 0.23
Yr. 2 Outlays 0.14 0.12 0.10 0.09 0.08 0.07 0.06 0.05 0.05 0.05 0.05 0.05 0.05
Yr. 3 Outlays 0.15 0.13 0.11 0.09 0.08 0.07 0.06 0.05 0.05 0.05 0.05 0.05
Total, New Depreciation 0.67 0.72 0.78 0.67 0.58 0.50 0.43 0.37 0.33 0.33 0.33 0.33 0.33 0.33
3. Overhead 0 0 0 0 0 0 0 0 0 0 0 0 0 0
4. Pretax Incremental Profit (8.53) (6.08) (3.39) 3.40 4.39 5.38 6.35 7.31 7.35 7.35 7.35 7.35 7.35 7.35
5. Tax Expense (2.56) (1.82) (1.02) 1.02 1.32 1.61 1.90 2.19 2.20 2.21 2.21 2.21 2.21 2.21
6. Aftertax Profit (5.97) (4.26) (2.38) 2.38 3.08 3.76 4.44 5.12 5.14 5.15 5.15 5.15 5.15 5.15
7. Cash Flow Adjustments
Add Back Depreciation 0.67 0.72 0.78 0.67 0.58 0.50 0.43 0.37 0.33 0.33 0.33 0.33 0.33 0.33
Less Added WIP Inventory 1.81 (0.42) (0.44) (1.19) 0.03 0.03 0.03 0.03 - - - - - -
Less Capital Spending (3.50) (5.00) (1.00) (1.00)
Terminal Value, Land
8. Free Cash Flow (3.50) (8.49) (4.96) (3.03) 1.86 3.68 4.29 4.90 5.51 5.47 5.47 5.47 5.47 5.47 5.47
Payback 7.9yrs -3.50 -11.99 -16.95 -19.98 -18.12 -14.44 -10.16 -5.26 0.25
DCF, Rotterdam = 15.50 -11.45 -0.9539904 7.95 yrs payback
IRR, Rotterdam = 18.0%
EPS - 0.04 - 0.09 - 0.05 - 0.03 0.02 0.04 0.05 0.05 0.06 0.06 0.06 0.06 0.06 0.06 0.06
9. Adjustment for Erosion in Merseyside Volume:
Lost Merseyside Output - - - 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500
Lost Merseyside Revenue - - - 11.81 11.81 11.81 11.81 11.81 11.81 11.81 11.81 11.81 11.81 11.81
Lost Merseyside Gross Profits - - - 1.36 1.36 1.36 1.36 1.36 1.36 1.36 1.36 1.36 1.36 1.36
Lost Gross Profits After Taxes - - - 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95
Change in Merseyside Inventory - - - 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35
 Exhibit 1
VICTORIA CHEMICALS PLC (B): THE MERSEYSIDE AND ROTTERDAM PROJECTS
Analysis of Rotterdam Project (financial values in GBP millions)
Eustace

Assumptions
Annual Output (metric tons) 250,000 Shares outsating
Output Gain Per Year/Prior Year 2.0% Discount Rate 10.0% 92,891,240
Maximum Possible Output 267,500 Depreciable Life (years) 15
Price/Ton (pounds sterling) 675 Overhead/Investment 0.0%
Inflation (prices and costs) 3.0% Salvage Value 0
Gross Margin Growth Rate/Year 0.50% WIP Inventory/Cost of Goods Sold 3.0%
Maximum Possible Gross Margin 15.0% Terminal Value of Right-of-Way 40
Gross Margin 11.5% Months Downtime, Construction 2008 5
Tax Rate 30.0% 2009 4
Investment Outlay (millions) Now 3.5 2010 3
2008 5 2011 0
2009 1
2010 1

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Year Now 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
1. Estimate of Incremental Gross Profit
New Output (tons) 255,000 260,100 265,302 267,500 267,500 267,500 267,500 267,500 267,500 267,500 267,500 267,500 267,500 267,500
Lost Output—Construction (106,250) (86,700) (66,326)
New Sales (Millions) 100.41 120.56 142.49 197.31 203.22 209.32 215.60 222.07 228.73 235.59 242.66 249.94 257.44 265.16
New Gross Margin 11.5% 12.0% 12.5% 13.0% 13.5% 14.0% 14.5% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%
New Gross Profit 11.55 14.47 17.81 25.65 27.44 29.30 31.26 33.31 34.31 35.34 36.40 37.49 38.62 39.77

Old Output 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000
Old Sales 168.75 173.81 179.03 184.40 189.93 195.63 201.50 207.54 213.77 220.18 226.79 233.59 240.60 247.82
Old Gross Profit 19.41 19.99 20.59 21.21 21.84 22.50 23.17 23.87 24.58 25.32 26.08 26.86 27.67 28.50
Incremental Gross Profit (7.86) (5.52) (2.78) 4.44 5.59 6.81 8.09 9.44 9.73 10.02 10.32 10.63 10.95 11.28
2. Estimate of Incremental Depreciation
Yr. 1 Outlays 0.67 0.58 0.50 0.43 0.38 0.33 0.28 0.24 0.23 0.23 0.23 0.23 0.23 0.23
Yr. 2 Outlays 0.14 0.12 0.10 0.09 0.08 0.07 0.06 0.05 0.05 0.05 0.05 0.05 0.05
Yr. 3 Outlays 0.15 0.13 0.11 0.09 0.08 0.07 0.06 0.05 0.05 0.05 0.05 0.05
Total, New Depreciation 0.67 0.72 0.78 0.67 0.58 0.50 0.43 0.37 0.33 0.33 0.33 0.33 0.33 0.33
3. Overhead 0 0 0 0 0 0 0 0 0 0 0 0 0 0
4. Pretax Incremental Profit (8.53) (6.24) (3.55) 3.77 5.02 6.31 7.66 9.07 9.39 9.69 9.99 10.30 10.62 10.95
5. Tax Expense (2.56) (1.87) (1.07) 1.13 1.51 1.89 2.30 2.72 2.82 2.91 3.00 3.09 3.19 3.28
6. Aftertax Profit (5.97) (4.37) (2.49) 2.64 3.51 4.42 5.36 6.35 6.58 6.78 6.99 7.21 7.43 7.66
7. Cash Flow Adjustments
Add Back Depreciation 0.67 0.72 0.78 0.67 0.58 0.50 0.43 0.37 0.33 0.33 0.33 0.33 0.33 0.33
Less Added WIP Inventory 1.81 (0.38) (0.42) (1.27) 0.02 0.02 0.03 0.03 (0.00) (0.00) (0.00) (0.01) (0.01) (0.01)
Less Capital Spending (6.00) (5.00) (1.00) (1.00)
Terminal Value, Land
8. Free Cash Flow (6.00) (8.49) (5.03) (3.13) 2.04 4.11 4.94 5.82 6.75 6.90 7.11 7.32 7.53 7.76 7.99
Payback 7.9yrs -6.00 -14.49 -19.52 -22.65 -20.60 -16.49 -11.55 -5.74 1.01
DCF, Rotterdam = 15.64 -10.20 -0.8500266 7.95 yrs payback
IRR, Rotterdam = 17.4%
EPS - 0.06 - 0.09 - 0.05 - 0.03 0.02 0.04 0.05 0.06 0.07 0.07 0.08 0.08 0.08 0.08 0.09
9. Adjustment for Erosion in Merseyside Volume:
Lost Merseyside Output - - - 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500
Lost Merseyside Revenue - - - 12.91 13.30 13.69 14.10 14.53 14.96 15.41 15.88 16.35 16.84 17.35
Lost Merseyside Gross Profits - - - 1.48 1.53 1.57 1.62 1.67 1.72 1.77 1.83 1.88 1.94 1.99
Lost Gross Profits After Taxes - - - 1.04 1.07 1.10 1.14 1.17 1.20 1.24 1.28 1.32 1.36 1.40
Change in Merseyside Inventory - - - 0.39 0.40 0.41 0.42 0.44 0.45 0.46 0.48 0.49 0.51 0.52