The case is based on an actual investment decision made by a major pap
QUESTION
The case is based on an actual investment decision made by a major paper-products company in the 1990s. The numbers and the company name have been disguised at the request of the company. The dates have been revised for pedagogical reasons. The case provides a glimpse into the paper business but is primarily designed to present a straightforward problem in assessing cash flows, cost of capital, and net present value of a capital-investment decision.
The case touches on the following capital-investment topics:
· Estimation of relevant cash flows (both cost savings and increased revenues)
· Influence of taxes vis-à-vis cost savings and revenues
· Change in net working capital as a cash flow
ANSWER:
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