Applied Corporate Finance Case: American Chemical Corporation The primary issue we are exploring here is the planned sale of the Collinsville Plant by American Chemical Corporation to Dixon at a negotiated price of $ 12 Million (as of end of year ‘79) Q1: Estimate the appropriate cost of capital for the investment To calculate the appropriate cost of capital we assessed Dixon’s purchase investment structure. The steps were as follows: 1. We first calculated the cost of debt of the investment using
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Case: AMERICAN CHEMICAL CORPORATION 1. Executive Summary Dixon‚ an American specialty chemical producer‚ wants to buy Collinsville plant from American Chemical Corporation‚ another typical chemical company in 1979. Dixon wants to diversify its product line buy acquiring the aforesaid plant‚ which produces sodium-chlorate to supply to paper producers in Southeastern part of the US. This plant initially cost 12 mln. USD and additional 2‚25 mln. USD needed to buy laminate technology to increase efficiency
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the company itself. Here‚ using 2 and 3 we are interested in both the asset beta of Dixon as well as the asset betas of companies whose assets are similar to the project (e.g. companies that own plants that produce Sodium Chlorate). Here‚ assuming a low grade debt beta of .3‚ Dixon has an unlevered beta of .73 based on the average debt/equity ratio from 1975-1979.[1] However‚ it is important to note that Dixon has reduced debt in recent years so the unlevered beta goes up to .81
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sell a Sodium Chlorate plant‚ near Collinsville‚ Alabama. Dixon‚ a specialty chemicals company‚ was willing to purchase the aforementioned plant for $12m with the option to invest a further $2.25m on laminate technology. The subsequent investment in Laminate technology was expected to eliminate graphite costs and reduce power consumption at the Collinsville plant by 15% to 20%. We will evaluate the acquisition of the Collinsville by Dixon at the proposed price. Table 1 identifies the assumptions
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after successfully acquiring 91% of the shares of Universal Paper Corporation. Dixon Corporation‚ a specialist chemical company with customers primarily in the paper and pulp industry agreed to the possibility of purchasing the Collinsville plant for $12 million. This purchase will diversify Dixon’s product line‚ adding the sodium chlorate chemical‚ produced at the Collinsville plant‚ needed by its existing customers. Dixon is evaluating different streams of cash flows for the possibility of purchasing
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GROUP SUBMISSION: Due 27 June 2011 Midnight American Chemical Corporation CASE QUESTIONS Read the American Chemical Corporation case that was handed to you. The underlying question to be answered is should Dixon acquire the Collinsville plant. In your case write-up‚ you can discuss the questions given below. Please note that the given questions are to be used only as a guide for your discussion. You do not need to answer the questions in the sequence they are presented. You can use the spreadsheet
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Executive Summary American Chemical Corporation’s Collinsville plant in Alabama is being sought by Dixon a speciality chemicals company. This plant mainly specialises in Sodium Chlorate production and fits well with Dixon’s strategy of supplying chemicals to paper and pulp industry. It would also complement Dixon’s existing product line. The plant costs $12million in investment and requires up to$ 2.25 million for upgrading to new technology. An in-depth investigation and analysis is conducted
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Introduction: 1) This report considers the potential purchase of the sodium chlorate producing plant in Collinsville‚ Alabama by Dixon Corporation from American Chemical Corporation in October 1979. The reason for this stems from the fact that American Chemical Corporation was attempting at the time to buy a controlling stake in Universal Paper Corporation‚ but the management of Universal contested this on the basis that it would be anti-competitive‚ given that they were both producers of sodium
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5 Risk Distribution in Various Delivery Systems Net Present Value Example Internal Rate of Return Example Illinois Tollway Revenues and Expenses Prisoners Held in Private Facilities 5 8 8 11 14 APPENDIX: A B C Weighted Average Cost of Capital (WACC) Map of the Illinois Tollway System IDOC Facility Information‚ FY 2003 22 24 25 EXECUTIVE SUMMARY With the growing trend of privatization and public private partnerships in state and local governments‚ the Commission has put together this report
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and Duke Energy. For the AMD‚ the WACC is 10.83%. For Duck Energy‚ the WACC is 2.76% When we calculate those number‚ we need to know the equity and debt of the company which can easily find on yahoo finance. The cost of debt and the corporate tax rate that we calculated are also based on the data from yahoo finance. We made Beta for the companies with 10 year ranges and use it to calculate return of equity. After we got those number‚ we can calculate the WACC. Advanced Micro Devices Bate—2
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