1. Do you endorse Eustace’s analysis of the project at Rotterdam? How would you improve on it?

2. After eliminating the right-of-way cash flows at Rotterdam, how do the Merseyside and Rotterdam projects compare financially and along other dimensions?

3. Why don’t the various investment criteria rank the two projects identically?

4. What should one do when IRR and NPV disagree in ranking mutually exclusive projects?

5. What do you make of Fawn’s concern about flexibility? Can we deal with that analytically and, if so, what is its effect on the value of the Merseyside project? What about its effect on the Rotterdam project?

6. Should Fawn be swayed by Eustace’s rhetoric?

7. Which project should Fawn approve? How should he justify his decision to the board of directors, who already have been exposed to Eustace’s ideas?

These two cases present the capital-investment decisions under consideration by executives of a large chemicals firm in January 2008. The A case (UVA-F-1543) presents a go/no-go project evaluation regarding improvements to a polypropylene production plant. The B case (UVA-F-1544) reviews the same project but from one level higher, where the executive faces an either/or investment decision between two mutually exclusive projects. The objective of the two cases is to expose students to a wide range of capital-budgeting issues.