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Yellow Sulfur Valuation

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Submitted By princecloud
Words 493
Pages 2
To: Yellow Sulfur Company
From: X

Re: Yellow Sulfur Company Valuation

After calculating the Net Present Value of three different scenarios for Yellow Sulfur’s options, we have come to the conclusion that it would be in the best interests of the company to go international.

There are 3 important reasons why we have come to this conclusion:

Greater Net Present Value

When comparing the Net Present Values between the unadjusted Status Quo and the Priller (International) options, we can see that the Priller option’s NPV is only 1.68% greater than the Status Quo option. However, this is only true for an optimistic result. By comparing the Priller NPV between the adjusted Status Quo and the Priller options, we can see that the Priller option’s NPV is significantly greater by 37.35%[1]. ♦ By taking an arithmetic average between the unadjusted and adjusted Status Quo, we could expect the Priller option’s NPV to still be 19.72% greater than the domestic option. ♦ This NPV calculation assumes the annual volume expectations of 300,000 are correct. ♦ The Priller option’s IRR (72.59%) surpasses the Internal Hurdle Rate of 12%.

Greater Terminal Value

The Priller option’s Terminal value is 51.56% greater than the unadjusted Status Quo and 80.62% greater the adjusted Status Quo[2]. ♦ Business is worth more on 10th period when it expands its international operations. ♦ This shows that the present value of the company is higher when they expand their international operations.

Opportunity to increase Market Share

In 2009, global sulfur production and demand was about 20 million tons. Of this, North American production and demand were about 9 million and 10 million tons, respectively. ♦ By going international, Yellow Sulfur Company would be accessing an additional market and

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