Cases In Financial Decision-Marking

Case Study: E. I. du Pont de Nemours & Company: Titanium Dioxide

Suggested Assignment Questions:

1. What are Du Pont’s competitive advantages in the TiO2 market as of 1972? How

permanent or defensible are they? What must Du Pont do to retain its competitive

advantage in the future?

2. Given the forecasts provided in the case, estimate the expected incremental free

cash flows associated with Du Pont’s growth strategy and maintain strategy for the

TiO2 market. Consider both an internal rate of return (IRR) and discount breakeven

analysis.

3. How much risk and uncertainty surround these future cash flows? Which looks most attractive?

4. Why the does the growth strategy create more value than the maintain strategy?

5. How might competitors respond to Du Pont’s choice of either strategy in the TiO2

market? What other factors should Du Pont consider in making this decision?

6. What exogenous risks besides competition could disrupt Du Pont’s strategy?

7. Which strategy – growth or maintain – do you think Du Pont should choose?  Justify

your reasoning?