Worldwide Paper

1326 Words Nov 10th, 2012 6 Pages
Worldwide 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 stock and sale, art paper& board-matt and gloss, food board and folding box board, LWC, wood-free, uncoated and coated fine papers and boards, recycles, FSC, carbon neutral and eco-friendly papers, and technical papers.
As the controller, Bob
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The detailed steps are displayed in TABLE 2
Conclusion:
Judging from what we have discussed above, the company should invest this investment, since the NPV is positive and IRR is bigger than WACC. Therefore, this investment will increase OCF, save costs and improve efficiency.
What is more, through this investment the company reduces the potential risk. They don’t need to purchase raw material from the Shenandoah Mill, owned by a competitor. And have a stable supply of raw materials。
In conclusion, the company should invest this investment.

Table 1 CASH FLOW | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | Terminal cash flow | Revenue | $4.00 | 10.00 | 10.00 | 10.00 | 10.00 | 10.00 | | Minus COGS(75% of revenue) | $3.00 | 7.50 | 7.50 | 7.50 | 7.50 | 7.50 | | Minus SG&A(5% of revenue) | $0.20 | 0.50 | 0.50 | 0.50 | 0.50 | 0.50 | | Net Income | $0.80 | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | | Add operating savings | $2.00 | 3.50 | 3.50 | 3.50 | 3.50 | 3.50 | | Minus depreciation | $3.00 | 3.00 | 3.00 | 3.00 | 3.00 | 3.00 | | Taxable Income | $(0.20) | 2.50 | 2.50 | 2.50 | 2.50 | 2.50 | | Minus Tax (40%) | $(0.08) | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | | Income after tax | $(0.12) | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 | | Add depreciation | $3.00 | 3.00 | 3.00 | 3.00 | 3.00 | 3.00 | | Operation cash flow | $2.88 | 4.50 | 4.50 | 4.50 | 4.50 | 4.50 | | Minus Total cash flow of investment | $(2+0.4) | (0.60) | | | | | | Total

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