Use the Excel files ?Victoria Chemicals Case A? and ?Victoria Chemicals Case B? to answer the following two questions:

• If there is no erosion at other plant, what is the crossover rate of the NPV profile of Merseyside project and the NPV profile of Rotterdam project?

If there is erosion at other sister plant, what is the crossover rate of the NPV profile of Merseyside project and the NPV profile of Rotterdam project?

Exhibit 2 VICTORIA CHEM Revised DCF Analysis of M (Reflects charge for FULL EROSION o (Financial values in millions Assumptions Annual Output (metric tons) Output Gain/Original Output Price/ton (pounds sterling) Inflation Rate (prices and costs) Gross Margin (ex. Deprec.) Old Gross Margin Energy Savings/Sales Year 1. Estimate of Incremental Gross Profit New Output (tons) Lost Output--Construction New Sales (Millions) New Gross Margin New Gross Profit Yr. 1-5 Yr. 6-10 Yr. 11-15 250,000 7.0% 675 3.0% 12.50% 11.5% 1.25% 0.75% 0.0% Discount rate Tax Rate Investment Outlay (mill.) Depreciable Life (years) Salvage Value WIP Inventory/Cost of Goods Months Downtime, Construction Preliminary Engineering Costs (mill.) Overhead/Investment Now 1 2008 2 2009 3 2010 4 2011 5 2012 267,500 (33,438) 157.99 13.8% 21.72 267,500 267,500 267,500 267,500 185.98 13.8% 25.57 191.56 13.8% 26.34 197.31 13.8% 27.13 203.22 13.8% 27.94 Old Output Old Sales Old Gross Profit 250,000 168.75 19.41 250,000 173.81 19.99 250,000 179.03 20.59 250,000 184.40 21.21 250,000 189.93 21.84 17,500 11.81 1.36 0.96 17,500 12.17 1.40 4.18 17,500 12.53 1.44 4.31 17,500 12.91 1.48 4.44 17,500 13.30 1.53 4.57 4.09 4.48 0.31 -0.71 4.81 4.61 0.32 -0.13 4.96 4.75 0.33 -0.13 5.11 4.90 0.34 -0.13 5.26 5.04 0.35 -0.14 1.60 1.39 1.20 1.04 0.40 0.90 0.32 1.60 -0.64 1.39 2.80 1.20 3.11 1.44 3.00 1.22 3.35 1.39 -0.58 2.76 -2.00 1.20 0.00 1.38 1.44 0.00 3.54 2.12 1.22 0.00 5.69 Erosion Lost Rotterdam Output (MT) Lost Rotterdam Revenue Lost Rotterdam Gross Profit Incremental Gross Profit 2. Estimate of Incremental WIP inventory New WIP inventory Old WIP inventory Lost Rotterdam WIP inventory Incremental WIP inventory 3. Estimate of Incremental Depreciation New Depreciation New Depreication, Tank cars Old Depreication, Tank cars Incremental Depreication Pretax Incremental Profit 6. Cash Flow Adjustments Less Capital Expenditures Add back Depreciation Change of WIP inventory 7. Free Cash Flow -12.00 -12.00 1.60 0.71 1.86 NPV = IRR = 8.50 21.2% Average annual addition to EPS= Payback Period= 0.020 4.782 years Sensitivity Analysis: NPV-Full Erosion 10% 8.50 6% 7% 8% 9% 10% 11% Discount Rate 12% Exhibit 2 VICTORIA CHEMICALS (A) DCF Analysis of Merseyside Project FULL EROSION of Rotterdam business volume) l values in millions of British Pounds) 10.0% 30% 12.0 15 0 3.0% 1.5 Not relevant Not relevant 6 2013 7 2014 8 2015 9 2016 10 2017 11 2018 12 2019 13 2020 14 2021 267,500 267,500 267,500 267,500 267,500 267,500 267,500 267,500 267,500 209.32 13.3% 27.74 215.60 13.3% 28.57 222.07 13.3% 29.42 228.73 13.3% 30.31 235.59 13.3% 31.22 242.66 12.5% 30.33 249.94 12.5% 31.24 257.44 12.5% 32.18 265.16 12.5% 33.15 250,000 195.63 22.50 250,000 201.50 23.17 250,000 207.54 23.87 250,000 213.77 24.58 250,000 220.18 25.32 250,000 226.79 26.08 250,000 233.59 26.86 250,000 240.60 27.67 250,000 247.82 28.50 17,500 13.69 1.57 3.66 17,500 14.10 1.62 3.77 17,500 14.53 1.67 3.89 17,500 14.96 1.72 4.00 17,500 15.41 1.77 4.12 17,500 15.88 1.83 2.43 17,500 16.35 1.88 2.50 17,500 16.84 1.94 2.57 17,500 17.35 1.99 2.65 5.45 5.19 0.36 -0.11 5.61 5.35 0.37 -0.11 5.78 5.51 0.39 -0.12 5.95 5.68 0.40 -0.12 6.13 5.85 0.41 -0.12 6.37 6.02 0.42 -0.07 6.56 6.20 0.43 -0.07 6.76 6.39 0.45 -0.08 6.96 6.58 0.46 -0.08 0.78 0.26 0.42 0.61 3.05 0.68 0.20 0.34 0.54 3.23 0.59 0.16 0.27 0.48 3.41 0.55 0.13 0.22 0.46 3.54 0.55 0.13 0.17 0.50 3.62 0.55 0.13 0.14 0.54 1.89 0.55 0.13 0.14 0.54 1.96 0.55 0.13 0.14 0.54 2.04 0.55 0.61 -0.03 2.72 0.54 0.00 2.81 0.48 0.00 2.87 0.46 0.00 2.94 0.50 0.00 3.04 0.54 -0.05 1.81 0.54 0.00 1.91 0.54 0.00 1.97 0.41 0.00 1.98 0.14 0.41 2.25 Discount Rate 13% 14% 15% 16% 17% 18% 19% 20% 15 2022 267,500 273.12 12.5% 34.14 250,000 255.25 29.35 17,500 17.87 2.05 2.73 7.17 6.78 0.47 -0.08 0.55 0.14 0.41 2.32 0.41 0.00 1.95 (Re Assumptions Annual Output (metric tons) Output Gain/Original Output Price/ton (pounds sterling) Inflation Rate (prices and costs) Gross Margin (ex. Deprec.) Old Gross Margin Energy Savings/Sales Year 1. Estimate of Incremental Gross Profit New Output (tons) Lost Output--Construction New Sales (Millions) New Gross Margin New Gross Profit Old Output Old Sales Old Gross Profit Incremental Gross Profit 2. Estimate of Incremental WIP inventory New WIP inventory Old WIP inventory Incremental WIP inventory 3. Estimate of Incremental Depreciation New Depreciation New Depreication, Tank cars Old Depreication, Tank cars Yr. 1-5 Yr. 6-10 Yr. 11-15 250,000 7.0% 675 3.0% 12.50% 11.5% 1.25% 0.75% 0.0% Now 1 2008 2 2009 267,500 (33,438) 157.99 13.8% 21.72 267,500 250,000 168.75 19.41 2.32 250,000 173.81 19.99 5.58 4.09 4.48 -0.39 4.81 4.61 0.20 1.60 1.39 185.98 13.8% 25.57 Incremental Depreication Pretax Incremental Profit 6. Cash Flow Adjustments Less Capital Expenditures Add back Depreciation Change of WIP inventory 7. Free Cash Flow -12.00 NPV = IRR = 16.78 29.6% -12.00 Average annual addition to EPS= Payback Period= 1.60 0.72 1.39 4.20 1.60 0.39 2.49 1.39 -0.59 3.73 8% 9% 0.032 4.121 years Sensitivity Analysis: NPV-No Erosion 10% 16.78 6% 7% Exhibit 2 VICTORIA CHEMICALS (A) Revised DCF Analysis of Merseyside Project (Reflects charge for FULL EROSION of Rotterdam business volume) (Financial values in millions of British Pounds) Discount rate Tax Rate Investment Outlay (mill.) Depreciable Life (years) Salvage Value WIP Inventory/Cost of Goods Months Downtime, Construction Preliminary Engineering Costs (mill.) Overhead/Investment 10.0% 30% 12.0 15 0 3.0% 1.5 Not relevant Not relevant 3 2010 4 2011 5 2012 6 2013 7 2014 8 2015 267,500 267,500 267,500 267,500 267,500 267,500 191.56 13.8% 26.34 197.31 13.8% 27.13 203.22 13.8% 27.94 209.32 13.3% 27.74 215.60 13.3% 28.57 222.07 13.3% 29.42 250,000 179.03 20.59 5.75 250,000 184.40 21.21 5.92 250,000 189.93 21.84 6.10 250,000 195.63 22.50 5.24 250,000 201.50 23.17 5.40 250,000 207.54 23.87 5.56 4.96 4.75 0.20 5.11 4.90 0.21 5.26 5.04 0.22 5.45 5.19 0.25 5.61 5.35 0.26 5.78 5.51 0.27 1.20 1.04 0.40 0.90 0.32 0.78 0.26 0.42 0.68 0.20 0.34 0.59 0.16 0.27 1.20 4.55 -2.00 1.20 -0.01 2.38 10% 1.44 4.48 1.22 4.88 0.61 4.62 0.54 4.85 0.48 5.08 1.44 -0.01 4.57 2.12 1.22 -0.01 6.75 0.61 -0.04 3.81 0.54 -0.01 3.93 0.48 -0.01 4.03 Discount Rate 12% 13% 14% 15% 11% olume) 9 2016 10 2017 11 2018 12 2019 13 2020 14 2021 267,500 267,500 267,500 267,500 267,500 267,500 228.73 13.3% 30.31 235.59 13.3% 31.22 242.66 12.5% 30.33 249.94 12.5% 31.24 257.44 12.5% 32.18 265.16 12.5% 33.15 250,000 213.77 24.58 5.72 250,000 220.18 25.32 5.90 250,000 226.79 26.08 4.25 250,000 233.59 26.86 4.38 250,000 240.60 27.67 4.51 250,000 247.82 28.50 4.65 5.95 5.68 0.28 6.13 5.85 0.29 6.37 6.02 0.35 6.56 6.20 0.36 6.76 6.39 0.37 6.96 6.58 0.38 0.55 0.13 0.22 0.55 0.13 0.17 0.55 0.13 0.14 0.55 0.13 0.14 0.55 0.13 0.14 0.55 0.14 0.46 5.26 0.50 5.39 0.54 3.71 0.54 3.84 0.54 3.97 0.41 4.24 0.46 -0.01 4.14 0.50 -0.01 4.27 0.54 -0.06 3.07 0.54 -0.01 3.22 0.54 -0.01 3.31 0.41 -0.01 3.36 16% 17% 18% 19% 20% 15 2022 267,500 273.12 12.5% 34.14 250,000 255.25 29.35 4.79 7.17 6.78 0.39 0.55 0.14 0.41 4.38 0.41 -0.01 3.85 ANALYSIS OF R ( Assumptions Annual Output (metric tons) Output Gain Per Year/Prior Year Maximum Possible Output Price/ton (pounds sterling) Inflation (prices and costs) Gross Margin Growth Rate/Year Maximum Possible Gross Margin Gross Margin Tax Rate Investment Outlay (millions) Year 1. Estimate of Incremental Gross Profit New Output Lost Output--Construction New Sales (Millions) New Gross Margin New Gross Profit Old Output Old Sales Old Gross Profit Incremental Gross Profit 2. Estimate of Incremental Depreciation Yr. 1 Outlays Yr. 2 Outlays Now 2008 2009 2010 250,000 2.0% 267,500 675 3.0% 0.5% 15.0% 11.5% 30.0% 0 5 1 1 0 Now 1 2008 255,000 (106,250) 100.41 11.5% 11.55 250,000 168.75 19.41 (7.86) 0.67 Yr. 3 Outlays Total, New Depreciation 3. Overhead 4. Pretax Incremental Profit 5. Tax Expense 6. After-tax Profit 7. Cash Flow Adjustments Add back Depreciation Less added WIP inventory Capital Spending Terminal Value, land 8. Free Cash Flow DCF, Rotterdam = IRR, Rotterdam = 0.67 0 (8.53) (2.56) (5.97) - 0.67 1.81 (5.00) (8.49) 15.64 21.8% 9. Adjustment for erosion in Merseyside volume: Lost Merseyside Output Lost Merseyside Revenue Lost Merseyside Gross Profits Lost Gross Profits after Taxes Change in Merseyside Inventory Total Effect on Free Cash Flow DCF, Erosion Merseyside Cash flows after erosion -4.08 - DCF, Rotterdam Adjusted for Full Erosion at Merseyside = IRR (8.49) 11.56 19.1% Sensitivity Analysis: 10% 6% 7% 8% NPV-No Erosion 15.64 NPV-Full Erosion 10% 11.56 6% 7% 8% VICTORIA CHEMICALS (B) ANALYSIS OF ROTTERDAM PROJECT (EXCLUDING RIGHT OF WAY) (Financial values in millions of British Pounds) Discount rate Depreciable Life (years) Overhead/Investment Salvage Value WIP Inventory/Cost of Goods Sold Terminal Value of Right-of-Way Months Downtime, Construction 2 2009 3 2010 4 2011 5 2012 10.0% 15 0.0% 0 3.0% Not relevant 2008 5 2009 4 2010 3 2011 0 6 2013 7 2014 8 2015 260,100 (86,700) 120.56 12.0% 14.47 265,302 267,500 267,500 267,500 (66,326) 142.49 197.31 203.22 209.32 12.5% 13.0% 13.5% 14.0% 17.81 25.65 27.44 29.30 267,500 267,500 250,000 173.81 19.99 (5.52) 250,000 250,000 250,000 250,000 179.03 184.40 189.93 195.63 20.59 21.21 21.84 22.50 (2.78) 4.44 5.59 6.81 250,000 250,000 201.50 207.54 23.17 23.87 8.09 9.44 0.58 0.14 0.50 0.12 0.43 0.10 0.38 0.09 0.33 0.08 215.60 14.5% 31.26 0.28 0.07 222.07 15.0% 33.31 0.24 0.06 0.72 0 (6.24) (1.87) (4.37) 0.15 0.78 0 (3.55) (1.07) (2.49) 0.13 0.67 0 3.77 1.13 2.64 0.11 0.58 0 5.02 1.51 3.51 0.09 0.50 0 6.31 1.89 4.42 0.08 0.43 0 7.66 2.30 5.36 0.07 0.37 0 9.07 2.72 6.35 0.72 (0.38) (1.00) (5.03) 0.78 (0.42) (1.00) (3.13) 0.67 (1.27) 0.58 0.02 0.50 0.02 0.43 0.03 0.37 0.03 ### 2.04 4.11 4.94 5.82 ### 6.75 - - 17,500 12.91 1.48 1.04 0.34 (0.70) 17,500 13.30 1.53 1.07 0.35 (0.72) 17,500 13.69 1.57 1.10 0.36 (0.74) 17,500 14.10 1.62 1.14 0.37 (0.76) 17,500 14.53 1.67 1.17 0.39 (0.78) (5.03) (3.13) 1.35 3.39 4.20 5.06 5.96 Discount Rate 11% 12% 13% 14% 15% 9% 10% 9% 10% Discount Rate 11% 12% 13% 14% 15% OF WAY) 9 2016 10 2017 11 2018 12 2019 13 2020 14 2021 15 2022 267,500 267,500 267,500 267,500 267,500 267,500 267,500 228.73 15.0% 34.31 235.59 15.0% 35.34 242.66 15.0% 36.40 249.94 15.0% 37.49 257.44 15.0% 38.62 265.16 15.0% 39.77 273.12 15.0% 40.97 250,000 250,000 250,000 250,000 250,000 250,000 250,000 213.77 220.18 226.79 233.59 240.60 247.82 255.25 24.58 25.32 26.08 26.86 27.67 28.50 29.35 9.73 10.02 10.32 10.63 10.95 11.28 11.61 0.23 0.05 0.23 0.05 0.23 0.05 0.23 0.05 0.23 0.05 0.23 0.05 0.23 0.05 0.06 0.33 0 9.39 2.82 6.58 0.05 0.33 0 9.69 2.91 6.78 0.05 0.33 0 9.99 3.00 6.99 0.05 0.33 0 10.30 3.09 7.21 0.05 0.33 0 10.62 3.19 7.43 0.05 0.33 0 10.95 3.28 7.66 0.05 0.33 0 11.29 3.39 7.90 0.33 (0.00) 0.33 (0.00) 0.33 (0.00) 0.33 (0.01) 0.33 (0.01) 0.33 (0.01) 0.33 0.18 6.90 7.11 7.32 7.53 7.76 7.99 8.41 17,500 14.96 1.72 1.20 0.40 (0.81) 17,500 15.41 1.77 1.24 0.41 (0.83) 17,500 15.88 1.83 1.28 0.42 (0.86) 17,500 16.35 1.88 1.32 0.43 (0.88) 17,500 16.84 1.94 1.36 0.45 (0.91) 17,500 17.35 1.99 1.40 0.46 (0.94) 17,500 17.87 2.05 1.44 0.47 (0.96) 6.10 6.27 6.46 6.65 6.85 7.05 7.45 16% 17% 18% 19% 20% 16% 17% 18% 19% 20% Comparison of M DCF Results of Base Cases (MM Pounds Ster Full Erosion No Erosion Case Source: NPV (base case) IRR WACC Base Case 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0% 17.0% 18.0% 19.0% 20.0% Merseyside VC_Case A_Revised 16.78 29.6% 10% Rotterdam, Excludes Right-of-Way VC_Case B_Revised 15.64 21.8% 10% Merseyside VC_Case A_Revised 8.50 21.2% 10% 24.87 22.56 20.45 18.53 16.78 15.17 13.70 12.35 11.10 9.95 8.89 7.91 7.00 6.15 5.37 27.49 24.00 20.89 18.12 15.64 13.42 11.44 9.66 8.06 6.62 5.33 4.16 3.12 2.17 1.32 13.98 12.42 11.00 9.70 8.50 7.41 6.40 5.47 4.61 3.81 3.08 2.39 1.76 1.16 0.61 Data for cash flow comparison: Year Now 2008 2009 Merseyside Rotterdam -12 0 2 -8 3 -5 Comparison of Free Cash Flows, Both Projects, Full Erosion 10 Free Cash Flow (mm pounds) 5 0 -5 -10 -15 Year Comparison of Merseyside and Rotterdam Projects based on DCF Analysis Results ases (MM Pounds Sterling) Full Erosion Original Rotterdam, Excludes Right-of-Way VC_Case B_Revised 11.56 19.1% 10% 30.00 Rotterdam, Merseyside, Rotterdam, Original Original With Original Not With Right-of-Way, Right-of-Way and Revised No Erosion Erosion VC_Case A VC_Case B VC_Case B 10.57 15.50 12.45 24.3% 18.0% 16.5% 10% 10% 10% 25.00 20.00 15.00 NPV 10.00 5.00 21.81 18.79 16.10 13.70 11.56 9.65 7.95 6.42 5.05 3.82 2.72 1.73 0.84 0.04 -0.68 0.00 10% 25.00 20.00 15.00 NPV 10.00 5.00 0.00 -5.00 2010 2011 2012 2013 2014 2015 10% 1 -3 4 1 6 3 3 4 3 5 3 6 cts, Full Erosion M erseyside Year Rotterdam NPV of Projects by Discount Rate (no erosion at other plant) 30.00 25.00 20.00 Merseyside Rotterdam 15.00 NPV 10.00 5.00 0.00 10% hurdle rate Discount Rate NPV of Projects by Discount Rate (full erosion at other plant) 25.00 20.00 15.00 NPV Merseyside Rotterdam 10.00 5.00 0.00 -5.00 10% hurdle rate Discount Rate 2016 2017 2018 2019 2020 2021 2022 3 6 Rotterdam 3 6 2 7 2 7 2 7 2 7 2 8