Worldwide Paper - 1925 Words

Drexel University Worldwide Paper Company Group 2 Case Analysis Brian Burke, John Lafferty FIN 790 Winter 2015 Seminar in Finance Dr. Samuel H. Szewczyk Lebow School of Business February 9, 2015 Executive Summary: Blue Ridge Mill is a wood mill owned by Worldwide Paper Company and supplies wood pulp for the company for use in paper production. Blue Ridge Mill bought its wood supply from Shenandoah Mill’s excess production of shortwood that was processed from its longwood supplies. In 2006, Bob Prescott, the controller for Blue Ridge Mill, was considering a project that would give Blue Ridge Mill the capability to process longwood into shortwood, which would eliminate the need to purchase from Shenandoah Mill, as well as compete†¦show more content†¦As a result, the cost of debt is 5.88% and is calculated as follows: The cost of equity can be calculated by using the capital asset pricing model (CAPM). CAPM requires that a market risk free rate, the market risk premium, and the beta for the company. The market risk premium (6%) and the company beta (1.1) is given directly and can be seen in tables 2 and 3 below. Government bonds are used for the risk free rate. Since 10 year corporate bonds are used for the cost of debt, the 10 year Treasury Bond of 5.60% will be selected as the risk free rate. The 10 year bonds are also a good match for the project duration, which is between 5 and 10 years. The cost of equity of 11.20% is than calculated as follows: With the cost of debt and the cost of equity calculated, the WACC is calculated below. The cost of debt is further discounted by one minus the tax rate since the interest paid on debt is treated as an expense prior to being taxed. Table 2: Interest Rates December 2006 Table 3: Company Financial Information Using the calculated WACC and the company’s hurdle rate for this project, under Bob Prescott’s cost savings and additional revenues assumption, the project’s IRR is now greater than the hurdle rate. Furthermore, the net present value (NPV), payback period and the additional value added to the earnings per share (EPS) are shown in Table 4 below. Using just these figures, the project should be accepted.Show MoreRelatedWorldwide Paper1269 Words   |  6 Pagessavings and revenue increases)? The investment proposed by Bob Prescott, an on-site longwood woodyard, would reduce operating costs by processing tree-length logs, as well as increase revenues by selling shortwood. Cost Savings: In 2006, Worldwide Paper’s Blue Ridge Mill had to purchase shortwood from competitor, Shenandoah Mill. The new woodyard would begin operations in 2008, thus saving Blue Ridge Mill $2mm in year one and $3.5mm the years after. The savings would come from theRead MoreWorldwide Paper1326 Words   |  6 PagesWorldwide Paper Case Study Incorporated in 2001, Worldwide Paper Company (WPC) is a corporation which is always focus on providing finest paper products to its clients and stakeholders. Headquartered in UAE, WPC’s most sales are distributed from the regions of Middle East, Asia, Africa and Levant. As a global company nowadays, the area of operation of WPC includes paper trading-commodity and conventional grads, indenting and custom order-commodity and conventional grades, merchanting and stockRead MoreWorldwide Paper658 Words   |  3 PagesEXECUTIVE SUMMARY Worldwide Paper Company Longwood Woodyard Proposal Blue Ridge Mill is considering the addition of a new on-site longwood woodyard in 2006. This proposal is expected to gain two primary benefits during its 6 years economic life: to bring substantial cost saving by eliminating the need to buy shortwood from outside suppliers and produce its own shortwood to sell in open market. After executing detailed and sensitivity analysis, the project is expected to create value for shareholdersRead MoreWorldwide Paper Company764 Words   |  4 Pagesï » ¿ EPPM3644 KEWANGAN KORPORAT DAN PENSTRUKTURAN SET: 3 REPORT OF CASE STUDY: CASE 19 WORLDWIDE PAPER COMPANY PROFESSOR: DR. LIZA MARWATI BINTI MOHD YUSOFF GROUP MEMBERS: LOH CHAI LING A140178 GOH HOOI SAN A139708 KERK (KEH) YIH JEN A139574 SEMESTER 2, 2013/2014 INTRODUCTION In December 2006, Bob Prescott, the controller for the Blue Ridge Mill, was considering the addition of a new on-site longwood woodyard. Two primary benefits for this new addition includeRead MoreWorldwide Paper Case2055 Words   |  9 Pages WORLDWIDE PAPER COMPANY Blue Ridge Mill currently purchases shortwood from a nearby competing mill for pulp production. Bob Prescott, the controller for Blue Ridge Mill, is considering the addition of a new on-site longwood woodyard. The new woodyard would have two main benefits including the ability to eliminate the need to buy shortwood from an outside source and the opportunity to sell shortwood on the open market as a new market for Worldwide Paper Company. The new woodyardRead MoreWorldwide Paper Company Case Write Up1126 Words   |  5 PagesIn the case of Worldwide Paper Company we performed calculations to decide whether they should accept a new project or not. We calculated their net income and their cash flows for this project (See Table 1.6 and 1.5). We computed WPC’s weighted average cost of capital as 9.87%. We then used the cash flows to calculate the company’s NPV. We first calculated the NPV by using the 15% discount rate; by using that number we calculated a negative NPV of $2,162,760. We determined that the discount rateRead MoreEffective Methods Of Becoming A Paperless Organization1663 Words   |  7 Pagesopt for an electronic version. Whether that is a receipt you get from a restaurant or an invoice from a hotel it is all sent via email. Some hotels and restaurants in the hospitality industry have found alternative techniques, as opposed to using paper. This essay will examine different methods used by certain organizations, which have been proven as effective methods of becoming a paperless organization. These include The Hilton hotels and even more specifically, The Waldorf Astoria. 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How can we be sure that, just as the clay tablet gave way to the scroll and bound book, the faith we have placed in paper editions will not be improved upon with the microchip? It may be that for all our attempts to squeeze and shrink information into screens, to encapsulate a world of knowledge into the size of a suitcase, to create a communications device which is alwaysRead MoreLegalization Of Marijuana And The Hemp1436 Words   |  6 Pagesquestions I will hope to answer within this paper. I will hopefully find enough supporting evidence to support the legalization of Marijuana and the hemp crop itself. The country‘s economy is really going through hard times right now, with our country in the most debt that it has ever seen. I firmly believe that the legalization will help facilitate the recovery with economic with growth in many different avenues. Some of these avenues will include growth in the paper industry, cloths industry, and the way