WORLDWIDE PAPER COMPANY Cost-of-Capital Information Interest Rates: December 2006 Bank Loan Rates (LIBOR) 1 year 5.

38% Government Bonds 1-year 5-year 10-year 20-year Market Risk premium Historical average 6.00% Corporate Aaa bonds: Aa A Baa

4.96% 4.57% 4.60% 4.73%

5.37% 5.53% 5.78% 5.37%

Worldwide Paper Financial Data Balance-sheet accounts ($ millions) Bank loan payable (LIBOR + 1%) Long-term debt Common equity Retained earnings Per-share data Shares outstanding (millions) Book value per share Recent market value per share 500 2500 500 2000

500 $500 $24.00

Other Bond rating A Beta 1.1 Information provided from case Tax Rate 40% Net working Capital 10% annual revenue SG&A 5% Revenue Straight line dperciation(Six year life ) Zero salvage value Depreciation charges begin after total $18M outlay Total Debt 3000 Equity Debt $12,000.00 Debt/(Debt + Equity) $0.20 20%

Equity

Equity/(Debt + Equity) $0.80 80% rD (1- Tc )*( D / V )+ rE *( E / V ) or Cost Debt %Debt (1 Tax Rate) + Cost Equity %Equity 0.09656 9.70%

WACC

NPV=

$0.72M