Please read the attached case study and use the guidelines below to write the paper.
– Do NOT use the numbers from the exhibits/tables in the word document. Instead, use the numbers in the revised tables in the excel document.
– Write one report/paper, but use the information from both Parts (A) and (B). Both are capital budgeting decisions, and decide whether the project should be accepted or rejected (and why).
– Use Net Present Value (NPV) for both projects, rather than IRR.
– Look at “actual” cash flows, NOT accounting numbers; all incremental (marginal or After-Tax) cash flows.
– Projects are mutually exclusive, so choose the project with the higher NPV.

Important Notes:

Part (A):
– Concern for transport decision: They spent GBP 2 million.
There’s an opportunity cost since they have to invest 2 years. (Address only, do not do calculations).
– Sales + Cannibalization: the sales erosion number is in Part (B).
– Concern for the assistant plant manager: Must decide what to do with the issue and explain why.
– Concern for treasury staff: take inflation i it exists. use 3% for both parts (A) and (B).
– Evaluating Capital-Expenditure Proposals: Use the four decision rules. Use NPV, (do not use IRR). For the other two criteria, explain if they are appropriate or not, and explain why.
– In exhibit 2, decide which assumptions need correction (Hint: the inflation rate should be 3%). Only mention the changes that were made.

Part (B):
– There are two issues: (1) whether to buy land, sell it, or don’t do anything. (2) Proposal: only mention in the case.
– In exhibit 1, inflation cannot be zero. It must be 3% (Be consistent with Merseyside and Rotterdam).
-Calculated erosion: NPV of GBP 12.45 million, mention effect of sales to cannibalization.
If it allies to Rotterdam, then apply to Merseyside.
– Then Make a recommendation (remember they’re mutually exclusive projects)