| Exhibit 2 |
| VICTORIA CHEMICALS (A) |
| Frank Greystock's DCF Analysis of Merseyside Project |
| (financial values in millions of British pounds) |
| Assumptions |
| Annual Output (metric tons) | | | | 250,000 | | Discount rate | | | | 10.0% |
| Output Gain/Original Output | | | | 7.0% | | Tax Rate | | | | 30% |
| Price/ton (pounds sterling) | | | | 675 | | Investment Outlay (mill.) | | | | 12.0 |
| Inflation Rate (prices and costs) | | | | 0.0% | | Depreciable Life (years) | | | | 15 |
| Gross Margin (ex. Deprec.) | | | | 12.50% | | Salvage Value | | | | 0 |
| Old Gross Margin | | | | 11.5% | | WIP Inventory/Cost of Goods | | | | 3.0% | | | |
| Energy Savings/Sales | | | Yr. 1-5 | 1.25% | | Months Downtime, Construction | | | | 1.5 | | | | | |
| | | | Yr. 6-10 | 0.75% | | Preliminary Engineering Costs | | | | 0.5 |
| | | | Yr. 11-15 | 0.0% | | Overhead/Investment | | | | 3.5% |
| | | | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 |
| | | Year | Now | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 |
| 1. Estimate of Incremental Gross Profit |
| | New Output (tons) | | | 267,500 | 267,500 | 267,500 | 267,500 | 267,500 | 267,500 | 267,500 | 267,500 | 267,500 | 267,500 | 267,500 | 267,500 | 267,500 | 267,500 | 267,500 |
| | Lost Output--Construction | | | (33,438) |
| | New Sales (Millions) | | | 157.99 | 180.56 | 180.56 | 180.56 | 180.56 | 180.56 | 180.56 | 180.56 | 180.56 | 180.56 | 180.56 | 180.56 | 180.56 | 180.56 | 180.56 |
| | New Gross Margin | | | 13.8% | 13.8% | 13.8% | 13.8% | 13.8% | 13.3% | 13.3% | 13.3% | 13.3% | 13.3% | 12.5% | 12.5% | 12.5% | 12.5% | 12.5% |
| | New Gross Profit | | | 21.72 | 24.83 | 24.83 | 24.83 | 24.83 | 23.92 | 23.92 | 23.92 | 23.92 | 23.92 | 22.57 | 22.57 | 22.57 | 22.57 | 22.57 |
| | Old Output | | | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 |
| | Old Sales | | | 168.75 | 168.75 | 168.75 | 168.75 | 168.75 | 168.75 | 168.75 | 168.75 | 168.75 | 168.75 | 168.75 | 168.75 | 168.75 | 168.75 | 168.75 |
| | Old Gross Profit | | | 19.41 | 19.41 | 19.41 | 19.41 | 19.41 | 19.41 | 19.41 | 19.41 | 19.41 | 19.41 | 19.41 | 19.41 | 19.41 | 19.41 | 19.41 |
| | Incremental Gross Profit | | | 2.32 | 5.42 | 5.42 | 5.42 | 5.42 | 4.52 | 4.52 | 4.52 | 4.52 | 4.52 | 3.16 | 3.16 | 3.16 | 3.16 | 3.16 |
| 2. Estimate of Incremental WIP inventory |
| | New WIP inventory | | | 4.09 | 4.67 | 4.67 | 4.67 | 4.67 | 4.70 | 4.70 | 4.70 | 4.70 | 4.70 | 4.74 | 4.74 | 4.74 | 4.74 | 4.74 |
| | Old WIP inventory | | | 4.48 | 4.48 | 4.48 | 4.48 | 4.48 | 4.48 | 4.48 | 4.48 | 4.48 | 4.48 | 4.48 | 4.48 | 4.48 | 4.48 | 4.48 |
| | Incremental WIP inventory | | | -0.39 | 0.19 | 0.19 | 0.19 | 0.19 | 0.22 | 0.22 | 0.22 | 0.22 | 0.22 | 0.26 | 0.26 | 0.26 | 0.26 | 0.26 |
| 3. Estimate of Incremental Depreciation |
| | New Depreciation | | | 1.60 | 1.39 | 1.20 | 1.04 | 0.90 | 0.78 | 0.68 | 0.59 | 0.55 | 0.55 | 0.55 | 0.55 | 0.55 | 0.55 | 0.55 |
| 4. Overhead | | | | 0.42 | 0.42 | 0.42 | 0.42 | 0.42 | 0.42 | 0.42 | 0.42 | 0.42 | 0.42 | 0.42 | 0.42 | 0.42 | 0.42 | 0.42 |
| 5. Prelim. Engineering Costs | | | | 0.50 |
| Pretax Incremental Profit | | | | -0.20 | 3.61 | 3.80 | 3.96 | 4.10 | 3.32 | 3.42 | 3.51 | 3.55 | 3.55 | 2.20 | 2.20 | 2.20 | 2.20 | 2.20 |
| 6. Cash Flow Adjustments |
| Less Capital Expenditures | | | -12.00 |
| Add back Depreciation | | | | 1.60 | 1.39 | 1.20 | 1.04 | 0.90 | 0.78 | 0.68 | 0.59 | 0.55 | 0.55 | 0.55 | 0.55 | 0.55 | 0.55 | 0.55 |
| Less Added WIP inventory | | | | 0.39 | -0.58 | 0.00 | 0.00 | 0.00 | -0.03 | 0.00 | 0.00 | 0.00 | 0.00 | -0.04 | 0.00 | 0.00 | 0.00 | 0.26 |
| 7. Free Cash Flow | | | -12.00 | 1.85 | 3.33 | 3.86 | 3.81 | 3.77 | 3.08 | 3.07 | 3.05 | 3.03 | 3.03 | 2.04 | 2.08 | 2.08 | 2.08 | 2.34 |
| NPV |
| IRR |
| MIRR |
| Profitability Index |
| Payback Period |
azoz9192
merseyside_projection.xlsx
