Help needed-Case 18. Worldwide Paper Company


Help needed-Case 18. Worldwide Paper Company

Case 18. Worldwide Paper Company

 

  1. What is the nature of the investment that is under consideration and what are the sources of value?
  2. What are the yearly cash flows that are relevant for this investment decision? Complete the worksheet named “CFs_Base Case” in the Excel file “Case_18 Worldwide Paper template.xls.” Do not forget the effect of taxes and the initial investment amount.
  3. What discount rate should Worldwide Paper Company (WPC) use to analyze those cash flows? Complete the worksheet named “Cost of Capital” in the Excel file “Case_18 Worldwide Paper template.xls.” Be prepared to justify your recommended rate and the assumptions that you used to estimate it.
  4. What is the net present value (NPV) and internal rate of return (IRR) for the investment? How do you interpret these numbers?
  5. What changes would you make to the base case numbers if an inflation rate of 2% is to be included in the cash flow projection? Complete the worksheet named “CFs_Adjusted for Inflation” in the same Excel file. Should the inflation effect have been considered as part of the base-case analysis?
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