Help needed-Case 18. Worldwide Paper Company
Case 18. Worldwide Paper Company
- What is the nature of the investment that is under consideration and what are the sources of value?
- 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.
- 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.
- What is the net present value (NPV) and internal rate of return (IRR) for the investment? How do you interpret these numbers?
- 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?