Introduction
Due to the old Merseyside production process, increased labour requirements and increased costs in relation to its major competitors (see Table 1), the earning has fallen to 180 pence per share in 2007 from 250 pence per share in 2006. The Victoria chemicals PLC is considering to conduct £12 million expenditure to renovate and rationalize the polypropylene production line at the Merseyside plant to make up for deferred maintenance and to increase production efficiency. The specific measures of this capital program including relocating and modernizing tank-car unloading areas, refurbishing the polymerization tank and renovating the compounding plant. Although Greystock has developed DCF analysis (see Exhibit 1), other members have their own ideas for the project. As the plant manager of Victoria Chemicals’ Merseyside Works, Morris needs to consider whether to add others opinions into the project and whether to promote the project for funding. There are four investment criteria for engineering-efficiency investment: positive net income, maximum payback period is 6 years, positive NPV of free cash flow and IRR should be greater than 10%.

Transport Division
To meet the project’s goal of increasing throughput, the Transport Division has to increase its allocation of tank cars to Merseyside Works. Greystock disagreed to put the cost of the tank cars into the initial outlay of capital program because he thought that the Transport Division wasn’t part of Intermediate Chemicals Group. From the whole operation system, the Transport Division is the key link to four petroleum refineries in England thus the new rolling stock s purchase is necessary. The total cost is £2 million and is depreciated in DDB method for the first 8 years and straight-line method for the last 2 years. After the DCF analysis, the pre-tax incremental profit changes and the NPV turns to