Diamond Chemicals

Published: 2021-09-10 16:55:08
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Category: Business

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Diamond Chemicals PLC(A): The Merseyside ProjectIdentify the relevant cash flows; 1n particular, the treatment of:a) Sunk costsThe sunk cost should not be a cost that should be borne by the project, it is a cost which will be anyway incurred by the company. The sunk cost or Preliminary Engineering Cost is estimated at 0.5 Million Dollars b) Cash flows obtained by cannibalizing another activity within the firmAccording to the Director of Sales, the prospect of the project makes her believe there will be a shift in capacity from Rotterdam to Merseyside. She believes that the cannibalization of such a project will result to a loss in sales in Rotterdam and this would not be worth it. But there is no cannibalization.c) Exploitation of excess transportation capacityThe transport Division estimates that the implementation of the project would require an increase in the allocation of tanks cars to Merseyside. This would incur a 2 million estimate for the new stock. d) Corporate overhead allocationsThe Corporate overhead allocations is estimated at 3.5%. Must not be kept.e) Cash flows of unrelated projectsThe cash flow for the unrelated project (EPC) need not be considered in our budget as it will only increase our budget instead of keep it minimal. This way there are more chances of getting it accepted by the council.

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