Worldwide Paper

b) The decision to invest in projects increases the shareholders value of the company. This is consistent with the growth and from the NPV criteria, positive NPV of projects increases the shareholder's value.

take advantage of as a competitive advantage to promote the investment. In addition, she thinks that

After carefully reviewing the income statement, balances sheet and cash flow it seems that the company has a negative cash flow for 1998, so even before thinking about obtaining internal and external resources for long term investment, the company must assure resources for their own working capital.

According to his financial model, the investment generates positive cash flow, excluding the initial investment, over the life of investment. This indicates further capital will not need to be raised for

From above statement it is clear that investment is worth it because market potential is much higher then the investment made to develop this product.

As shown in the ratios chart, working capital has increased by $13M. Maturities of short-term investments and cash flow from operations are projected to be sufficient to sustain the company’s overall financing needs, including capital expenditures. The following corporate strategic plan identifies a project that needs financial backing.

In response to the tragic events of September 11, 2001, there has been renewed interest in the creation of a national identification system, typically embodied in a "smart" ID card, as a component of a national counter-terrorism strategy. National ID cards have been advocated as a means to enhance national security, unmask potential terrorists, and guard against illegal immigrants. "The core issue can be expressed as a question: What actions should the federal government take to certify the identity of its citizens and other persons in its jurisdiction, and what role should computing technology play in that process? To deal with questions like this, lawmakers, leaders, and government agencies often begin the policymaking

The author must determine all the factors which make operation in Corporateville cheaper than Middlesburg. For instance, even though the taxes may be low the logistic cost may be so high that it could outweigh any benefits from tax saving. Even considering the safety aspect, there is no citation in the argument which assures Corporateville to be more safer than Middlesburg. Furthermore, there is no evidence that states that Supercorp was facing safety issues at Middlesburg.

Referring to Vice President of Finance, he want to pursue the current approach because they are in profitable based on contribution margin by 35 percent. The company just needs to monitor their margin in control their cost well.

How much value do you expect to be created by operating improvements and capital structure changes envisioned by CD&R?

Being the world’s largest paper maker indicates having a larger inventory, more current assets (esp. since it owns timberland and several facilities), and higher cost of goods sold than other paper makers. The inventory for Company J (10.9) is larger than the inventory for Company I (8.8); the current assets for Company J (32.6) are higher than that for Company I (27.2); and the cost of goods sold for Company J (82.9) is higher than that for Company I (75.3). We also expect that, as the world’s largest paper maker, their products will move on the marketplace better than a smaller producer of

The present value of the net incremental cash flows, totaling $5,740K, is added to the present value of the Capital Cost Allowance (CCA) tax shield, provided by the Plant and Equipment of $599K, to arrive at the project’s NPV of $6,339K. (Please refer to Exhibit 4 and 5 for assumptions and detailed NPV calculations.) This high positive NPV means that the project will add a significant amount of value to FMI. In addition, using the incremental cash flows (excluding CCA) generated by the NPV calculation, we calculated the project’s IRR to be 28%. This means that the project will generate a higher rate of return than the company’s cost of capital of 10.05%. This is also a positive indication that the company should undertake the project.

Secondly, the investor has a high chance of earning more money in the form of profits as a

This design should increase operational efficiency and overall profitability based on return on investment (ROE) calculations.

The Internal Rate of Return (IRR) is 60.38% which is much higher than the cost of capital of 14.5%., and the higher a project's internal rate of return, the more desirable it is to undertake the project. The profitability index would be 4.95 which is much greater than 1, and whenever the profitability index reaches a number above 1 the project should be accepted. Even if the company is interested in selling the Bernoulli division it would still increase the value of the division if they were to make the investment now and sell it later on. As we had mentioned above the opportunity cost of capital is only 14.5%, but the aforementioned benefits from the investment are much higher. Even thought the management is a bit weary of this investment, if the sales projections are correct then the additional investment will definitely turn around this division.