Richard B :: Business and Management Studies:

Richard BThe comprise of the give renovation is paid in full on celestial latitude 31, 1991.1) Changes to analysisa. The lost output due to construction should reflect the high output of the renovated plant (24,075). Thereby the net output for the year corresponds to 10 months of the clean output.b. The DDB depreciation should switch to straight-line when straight line is greater. Otherwise the plant does not get fully depreciated.c. The 3.5% overhead on capital for new projects should not be applied for the renovation of lively equipment. The overhead of the existing plant is not affected. Since there is no incremental change in overhead, it should not be included in the analysis.d. The preliminary engineering monetary value should not be included in the analysis for making a decision to renovate the plant. These be sunk costs and therefore argon not included in an incremental analysis.e. A cumulative DCF was added so the payback period is clearly illustrate d. The Hawkins analysis appeared to add the Free property Flow without discounting to rule the payback period. The revised payback period is 5.21 years.f. The same annuity was added. The annuity equivalent to the revised NPV of 6.08 million pounds is 0.80 million pounds. This count on can be divided by the number of shares FYE 91 to obtain the average earnings per share of 0.0086 pounds. The Hawkins analysis appeared to average the Free money Flow without discounting then divided by the number of shares to obtain the EPS.g. Hawkins should practise sensitivity analyses to the market price of polypropylene, the cost of the renovation, and the efficiency advantage of the renovated plant. (These are shown in Exhibits 2b through 2e). The margins are revised for the new prices keeping the cost of production fixed.Transport DivisionThe cost of the additional capital require by the transport divisionshould not be included in the analysis. Empirical Chemicals isa ctually helping the transport division by utilize its excess capacity. Additional capital obtained by the transport division should be paidby all of its customers through transportation fees.Director of gross revenue=================There are a number of producers of polypropylene that have highcosts than EC Rotterdam. These producers will be the first to feel