In October 1998, Anton van Leuven, managing director of Axeon N. V, a large Dutch chemical company, was faced with a difficult decision. Ian Wallingford, managing director of Axeon's British subsidiary, Hollandsworth, Ltd., and Jeremy Noble, a member of Hollandsworth s board of directors, were frustrated that an investment proposal that had been presented some time ago had not yet been approved. The board member had even threatened to resign his post. But Mr. van Leuven had received advice from some of his other managers to reject the Hollandsworth proposal.
EXHIBIT 1
Axeon N. V. Organization Chart

EXHIBIT 2
Axeon N. V. Proposal for Manufacture of AR-42 in England-Financial Summary (£000)

Questions
1. What was wrong with Mr. Wallingford's original AR-42 proposal? Should the proposal have been accepted by the Hollandsworth and Axeon boards of directors? What should Mr. van Leuven do now regarding Mr. Wallingford's AR-42 proposal?
2. What, if anything should be done to prevent issues like this from occurring again?

Transcribed Image Text:

Managing Director Anton van Leuven | Г\p,Finance (Arnold Koonts) VR-Personne EVP-Renearch&Engineering L VP Administration Senior VI Saraceno, SpAManaging Director Hollandsworth, Ltd Ian Wallingford KAG Chemicals A B Dutch Operations Willem Backer Director, Sales Geert De Rijcke Marc Oosterling Manudacturing Sales & R&D Fiance Manufacturing Sales & Director, Mfg Marketing Paper industry sales 19 plants Food industry sales Customer products industry sales Export siles Marketing research Year 0 3 4 5 6 7 Total (1,400) (160) (10) (20) Equipment Working capital Cash operating profit Recovery value of equipment 196 328 460 460 460 348 348 and working capital Total 1030 (1,560) 186 308 460460 460 348 1378 2,040 Net present value (@ 8%) Payback period Internal rate of return £916,000 4% years 20%