E.I. DU PONT DE NEMOURS AND CO.

: TITANIUM DIOXIDE

Tax rate (p.4, f.note 4) 48% NWC/ sales 20%

Existing capacity 325 Invest. Credit 10%

Data on market shares, capcity and costs

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983
Market size ('000 t) 752 774 798 822 846 872 898 925 952 981 1010
Market share (%):
Maintain 35% 40% 45% 45% 45% 45% 45% 45% 45% 45% 45%
Growth 35% 40% 47% 47% 51% 52% 52% 55% 58% 59% 61%
Selling price ($ per tonne)
Maintain 555 665 760 890 955 1015 1070 1120 1170 1210 1270
Growth 540 640 750 880 950 1010 1070 1130 1190 1250 1310
Operating costs ($ /t) 330 390 460 540 580 620 660 690 710 740 770
Capacity (000 t):
Maintain 340 350 360 370 381 392 404 416 428 441 455
Growth 350 375 400 421 443 475 505 530 552 579 616
Capacity cost ($/t) 900 927 955 983 1013 1043 1075 1107 1140 1174 1210

Incremental free cash flow : Maintain - Existing

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983
(A) Incremental PAT
Sales ('000 t) 263.20 309.60 359.10 369.90 380.70 392.40 404.10 416.25 428.40 441.45 454.50
Inc. sales ('000 t) 0.00 0.00 34.10 44.90 55.70 67.40 79.10 91.25 103.40 116.45 129.50
Inc. sales ($ m.) 0.00 0.00 25.92 39.96 53.19 68.41 84.64 102.20 120.98 140.90 164.47
Inc. Op. costs ($ m.) 0.00 0.00 15.69 24.25 32.31 41.79 52.21 62.96 73.41 86.17 99.72
Inc. EBIT ($ m.) 0.00 0.00 10.23 15.72 20.89 26.62 32.43 39.24 47.56 54.73 64.75
Inc. PAT ($ m.) 0.00 0.00 5.32 8.17 10.86 13.84 16.86 20.40 24.73 28.46 33.67
(B) Incremental investment
1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983
Inc. NWC (20% of sales) 0.00 0.00 5.18 2.81 2.65 3.04 3.25 3.51 3.76 3.99 4.71
Inc. capacity (000 t) 15 10 10 10 11 11 12 12 12 13 14
Invest. Capacity ($ m.) 13.50 9.27 9.55 9.83 11.14 11.47 12.90 13.28 13.68 15.26 16.94
Total. Inc. investment ($ m.) 13.50 9.27 14.73 12.64 13.79 14.52 16.15 16.80 17.44 19.25 21.65
Less: Investment credit 1.35 0.93 0.96 0.98 1.11 1.15 1.29 1.33 1.37 1.53 1.69
Net incr. investment ($ m.) 12.15 8.34 13.78 11.66 12.68 13.37 14.86 15.47 16.07 17.72 19.96
Investment recovery - 1985
Inc. FCF ($ m.) (12.15) (8.34) (8.46) (3.48) (1.81) 0.47 2.01 4.94 8.67 10.74 13.71

Incremental free cash flow : Growth - Existing

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983
(A) Incremental PAT
Sales ('000 t) 263.20 309.60 375.06 386.34 431.46 453.44 466.96 508.75 552.16 578.79 616.10
Inc. sales - ('000 t) 0.00 0.00 50.06 61.34 106.46 128.44 141.96 183.75 227.16 253.79 291.10
Inc. sales - old capacity ($ m.) (3.95) (7.74) (3.25) (3.25) (1.63) (1.63) 0.00 3.25 6.50 13.00 13.00
Inc. sales - new capacity ($ m.) 0.00 0.00 37.55 53.98 101.14 129.72 151.90 207.64 270.32 317.24 381.34
Total Inc. sales ($ m.) (3.95) (7.74) 34.30 50.73 99.51 128.10 151.90 210.89 276.82 330.24 394.34
Inc. Op. costs ($ m.) 0.00 0.00 23.03 33.12 61.75 79.63 93.69 126.79 161.28 187.80 224.15
Inc. EBIT ($ m.) (3.95) (7.74) 11.27 17.61 37.77 48.47 58.20 84.10 115.54 142.43 170.19
Inc. PAT ($ m.) (2.05) (4.02) 5.86 9.15 19.64 25.20 30.27 43.73 60.08 74.07 88.50

(B) Incremental investment

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983
Inc. NWC (20% of sales) (0.79) (0.76) 8.41 3.29 9.76 5.72 4.76 11.80 13.19 10.68 12.82
Inc. capacity (000 t) 25 25 25 21 22 32 30 25 22 27 37
Invest. Capacity ($ m.) 22.50 23.18 23.88 20.64 22.29 33.38 32.25 27.68 25.08 31.70 44.77
Total. Inc. investment ($ m.) 21.71 22.42 32.28 23.93 32.04 39.09 37.01 39.47 38.27 42.38 57.59
Less: Investment credit 2.25 2.32 2.39 2.06 2.23 3.34 3.23 2.77 2.51 3.17 4.48
Net incr. investment ($ m.) 19.46 20.10 29.89 21.87 29.81 35.76 33.78 36.71 35.76 39.21 53.11
Investment recovery - 1985
(C) Inc. FCF ($ m.) (21.51) (24.12) (24.04) (12.71) (10.18) (10.55) (3.52) 7.03 24.32 34.85 35.39

Incremental cash flow: Growth - Mainatin

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983
(9.36) (15.78) (15.58) (9.23) (8.36) (11.03) (5.53) 2.09 15.65 24.11 21.68

Investment M-E G-E G-M Analysis IRR

Cum. capex 171.0 394.8 223.8 M-E 23.6%
Cum. WC 43.1 107.2 64.0 G-E 22.2%
Total cum. Invest 214.1 502.0 287.8 G-M 21.3%
Invest. net of tx.cr 197.0 462.5 265.5 Rate of discount
 1984 1985
1041 1072

45% 45%
62% 64%

1320 1370
1370 1430
810 850

468 482
645 685
1246 1283

1984 1985

468.45 482.40
143.45 157.40
189.35 215.64
116.19 133.79
73.16 81.85
38.04 42.56
 1984 1985
4.98 5.26
13 14
16.20 17.96
21.18 23.22
1.62 1.80
19.56 21.42
214.12
18.49 235.26

1984 1985

645.42 686.08
320.42 361.08
16.25 19.50
438.98 516.34
455.23 535.84
259.54 306.92
195.69 228.93
101.76 119.04

1984 1985
12.18 16.12
29 40
36.13 51.32
48.31 67.44
3.61 5.13
44.70 62.31
501.95
57.06 558.68

1984 1985
38.57 323.42

NPV @ 15%
27.00
55.93
28.93
15%