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1. CASE 18:WORLDWIDE PAPER COMPANYPresented By: Divya Mishra & Team Capital Budgeting & Resource Allocation 1 Dated : 04/20/2011

3. Swot Analysis

4. Problem Identification

5. Data analysis

6. Recommendation2

8. NEW WOODYARD 4

10. The Shenandoah mill is owned by a competitor5

12. Creates the opportunity to sell shortwood on the open market as a new market

13. Reducesoperating cost and increases revenue6

14. New Woodyard Excess Capacity Shortwood for pulp production Sell shortwood in open market PRIMARY BENEFITS OF NEW WOODYARD 7

15. SWOT ANALYSIS 8

17. Investment ($18 million)outlaywould be spent over two calendar years:9

21. SG&A = 5% of revenue

22. Tax rate = 40%

23. Straight-line depreciation ( over the six year life) with zero salvage value

24. Net Working capital = 10% annual revenue

25. Depreciation charges begin after the total $18 million outlay and machinery starts the serviceCASE INFORMATION 12

26. PROBLEM IDENTIFICATION What will the current WACC be? Whether the expected benefits were enough to justify the $18million capital outlay plus the incremental investment in working capital over the six-year life of the investment? 13

27. FLOW CHART Calculate WACC 1) Calculate NPV, IRR, PI, MIRR 2) Final Decision 3) 14

30. WPC has a company policy to use its corporate Cost of Capital to analyze investment opportunities

31. WPC has not changed its WACC in 10 years

32. NPV = ($2.14) (Negative)

33. View Worldwide Paper Company.xls here16

35. PAST 30 YEARS 18

36. Current WACC = 9.67% NPV = $0.72 million IRR =10.88% PI= 1.045 MIRR = 10.36% 19 DATA ANALYSIS-UPDATED WACC EXCEL HAS MAGIC Worldwide Paper Company-1.xlsx

37. RECOMMENDATION 20

39. QUESTIONS 22 THANK YOU