FIN475 Spring 2009 Group Assignment 1 Diamond Chemicals PLC (A): The Merseyside Project Due: Tuesday, February 3, 2009 Instructions: This is a group assignment. Please see my web page (http://www.fsb.muohio.edu/nixontd/) for your group assignment. Lucy Morris has asked for your assistance in evaluating the Merseyside Project. Prepare a memo from your group to her in which you address the items found below. Please limit your memo to no more than three pages of text. You may use as many pages of exhibits as you deem necessary. However, you will only want to provide exhibits that you discuss in your memo. A spreadsheet of Exhibit 2 in the case is available under the Case Aids section of my FIN475 website. Make use of this during your analysis. Note that you may have to correct some of the entries made in this spreadsheet. Presentation counts. Make sure to proof you memo for spelling, grammar, etc. Address the following items in your memo: 1. Critique the way in which Diamond Chemicals evaluates its capital-expenditure proposals (i.e., its capital budgeting techniques). Give an in-depth analysis based upon class discussion and the text. You may also draw upon previous courses' material (i.e., FIN 301, FIN 302 or other related classes.) 2. What changes, if any, should Lucy Morris ask Frank Greystock to make in his discountedcash flow analysis? Why? What should Morris be prepared to say to the Transport Division, the director of Sales, her assistant plant manager and the analyst from the Treasury staff? Note: There may be additional changes beyond those explicitly mentioned in the case. Update exhibit 2 (see spreadsheet on my webpage) to reflect these changes. 3. Given your answers to (1) and (2) above, should Morris continue to promote the project for funding? Note: You'll want to provide a valuation for the project that supports your answer.