American Chemical Corp.
provide the answers to the following questions for American Chemical Corporation – HBP Case # 280-102
in Word and Excel files.
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.
2. Project the incremental cash flows associated with the acquisition of the Collinsville plant without the laminate technology and estimate the acquisition’s net present value.
Seaparetly, project the incremental cash flows associated with the 1980 investment in laminate technology and estimate the investment’s NPV.
3. This ill enable you to determine: is the Collinsville proposal attractive on economic grounds?
4. Assess the strategic issues associated with the proposal. Is Collinsville attractive on strategic grounds?
5. As CEO of Dixon Corporation, would you approve the acquisition of the Collinsville plant at the price and on the terms proposed? Why, or why not? What alternatives, if any, would you suggest?