Solution case Harvard Business Study Birch Paper companyFull description
Case Study on Birch Paper Company
https://www.ftpworldwide.com/ Our Secure ftp service has an online management comfort to administer users, access usage logs and manage your files, putting you firmly in control of what’s being stored and shared by your users and systems.
Chapter 2 Akun IbterFull description
re
Descripción: For the Aberrant Roleplaying System. It's okay. Like the system but this particular book is kinda meh.
Kasus 6-2 BIRCH PAPER COMPANY Bab 6 Transfer Pricing Management Control Systems 12th ed Anthony and Govindarajan MCGraw-HillFull description
ok
Oil Refinery CapacitiesFull description
CASO PRACTICO Parcelforce Worldwide
re
ipcFull description
Calisthenics plan
Calisthenics planFull description
A case analysis on "Hilton HHonors Worldwide: Loyalty Wars."
Descripción completa
Descripción: A case analysis on "Hilton HHonors Worldwide: Loyalty Wars."
Full description
Worldwide Paper Company Case Group Click toDedit Master subtitle style Paul Weaver Mohammed Wajiuddin Michael Dominguez Lilli Myers Briton Hitchins Venus Roldan 6/26/12
11
Outline v
Case Background
v
Swot Analysis
v
Problem Identification
v
Data analysis
v
Recommendation
6/26/12
22
The Case Background v In December 2006,Bob Prescott, Prescott, the
controller for the Blue Ridge Mill, was considering the addition of a new onsite longwood woodyard
6/26/12
33
New WOODYARD Investment New Woodyard Utilizes a new technology that allows tree-length logs, called longwoods to be processed directly
6/26/12
44
Current Practice ØBlue Ridge Mill purchases
shortwood from the Shenandoah Mill Ø Th The e She Shenan nando doah ah mill is own owned ed by
a competitor 6/26/12
55
Advantages of the Investment v
Eliminates the need to purchase shortwood from an outside supplier (Shenandoah Mill)
v
Opportunity grow 0to sell shortwood on the open market as a new market
Reduces operating cost and increases revenue 6/26/12 v
66
PRIMARY BENEFITS OF NEW WOODYARD New New Woodyard Excess Capacity
Shortwood for pulp production
6/26/12
Sell shortwood in open market
77
SWOT ANALYSIS STRENGTHS
WEAKNESSES
q
Strong Sale support
q
Applying outdated WACC
q
Decreasing Wacc
q
Wrong investment
decisions in past due to incorrect WACC
OPPORTUNITIES q
New machine might
decrease the operating
THREATS q
Competition from
Shenandoah mill
cost q
Independence from the
6/26/12
88
CASE INFORMATION q The
new woodyard would begin operating in 2008
q
Investment ($18 million)outlay would be spent over two calendar years: 2007 2008 $16 million
6/26/12
$ 2 million 99
CASE INFORMATION q
Operating savings :
(Buying shortwood) – (Cost of producing shortwood)2008
$2 million
6/26/12
Future $3.5 million
1010
CASE INFORMATION q
Expected revenues ($ million) by selling shortwood on open op en market market : 2008
2009
2010
2011
2012
2013
$4
$10
$10
$10
$10
$10
6/26/12
1111
CASE INFORMATION q
Cost of Capital = 75% of revenue
q
SG&A = 5% of revenue
q T Tax ax
rate = 40%
q
Straight-line depreciation ( over the six year life) with zero salvage value
q
Net Working capital = 10% annual revenue
q
Depreciation charges begin after the total $18 Depreciation million outlay and machinery starts the service
6/26/12
1212
PROBLEM IDENTIFICATION 1)
What will the current WACC be?
1)
Whether the expected benefits were enough to justify the $18million capital outlay plus the incremental investment in working capital over the six-
6/26/12
1313
FLOW CHAR CHART T
6/26/12
1)
Calculate WACC
2)
Calculate NPV, IRR, PI, MIRR
3 )
Final Decisio n
1414
DATA ANALYSIS- CASH FLOW q
Cash Flow 2007
2008
2009
2010
2011
2012
2013
Terminal value
($16) $0.48 $3.90 $4.50 $4.50 $4.50 $4.50 $2.08
6/26/12
1515
DATA ANALYSIS- OUTDATED WACC q
WACC = 15% v
WPC has a company policy to use its corporate Cost of Capital to analyze investment opportunities
v
WPC has not changed its WACC in 10 years
q
NPV = ($2.14) (Negative)
q
View Worldwide Paper Company.xls here
6/26/12
1616
DATA ANALYSIS-UPDATED WACC q
Current WACC (US department of Treasure)
6/26/12
1717
PAST 30 YEARS
6/26/12
1818
DATA ANALYSIS-UPDATED WACC 1)
Current WACC = 9.67%
2)
NPV = $0.72 million
3)
IRR =10.88%
4)
PI= 1.045
5)
MIRR = 10.36% EXCEL HAS EXCEL Worldwide Worldwid e Paper Company-1.xlsx MAGIC
6/26/12
1919
RECOMMENDATION WACC
9.67%
Updated
NPV
$0.72 million
Positive
IRR
10.88% Greater than WACC 10.36% Greater than WACC
MIRR
PI 6/26/12
1.045
Greater than 1 2020
RECOMMENDATION q
Decision:
The expected expected benefits are are enough to justify justif y the $18million capital outlay outlay plus the incre inc remental mental investment in working capital over the six-year six-year life of the investment
“Invest in the new longwood 2121 6/26/12 Woodyard”