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  • World Wide Paper Company

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    AshwinKumar
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    This document presents a discounted cash flow analysis for a company with an initial $18 million capital expenditure investment in 2016 and projected revenue and costs from 2016-2022. The analysis calculates free cash flow each year discounted using an 8% rate. The discounted cash flows yield a positive net present value of $1.6 million and internal rate of return of 10.7%. Additional sections provide the company's capital structure, weighted average cost of capital calculation of 7.34%, and tax and interest rate assumptions.

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    World Wide Paper Company

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    This document presents a discounted cash flow analysis for a company with an initial $18 million capital expenditure investment in 2016 and projected revenue and costs from 2016-2022. The analysis calculates free cash flow each year discounted using an 8% rate. The discounted cash flows yield a positive net present value of $1.6 million and internal rate of return of 10.7%. Additional sections provide the company's capital structure, weighted average cost of capital calculation of 7.34%, and tax and interest rate assumptions.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    23 views2 pages

    World Wide Paper Company

    Uploaded by

    AshwinKumar
    This document presents a discounted cash flow analysis for a company with an initial $18 million capital expenditure investment in 2016 and projected revenue and costs from 2016-2022. The analysis calculates free cash flow each year discounted using an 8% rate. The discounted cash flows yield a positive net present value of $1.6 million and internal rate of return of 10.7%. Additional sections provide the company's capital structure, weighted average cost of capital calculation of 7.34%, and tax and interest rate assumptions.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    of 2

    Discounted Cash Flow Analysis

    Discount Rate:
    Tax Rate:
    Capex Investment

    8.00%
    40.0%
    $18.0

    ($ in millions, except per share data)


    2016
    Revenue
    COGS
    % Revenue
    SGA
    % Revenue
    Operating Savings
    Depreciation
    EBIT
    Less: Taxes (40.0%)
    NOPAT
    Add: D&A
    Less: Capex
    Less: NWC
    NWC Recovery
    Capex Recovery
    Free cash flow

    2017

    Year Ending May 31,


    2018
    2019
    2020

    2021

    2022

    $0.0
    0.0
    ($18.0)
    $0.0

    $4.0
    ($3.0)
    75.0%
    ($0.20)
    5.0%
    $2.0
    ($3.0)
    ($0.2)
    0.1
    ($0.1)
    $3.0
    $0.0
    ($0.4)

    $10.0
    ($7.5)
    75.0%
    ($0.50)
    5.0%
    $3.5
    ($3.0)
    $2.5
    (1.0)
    $1.5
    $3.0
    $0.0
    ($0.6)

    $10.0
    ($7.5)
    75.0%
    ($0.50)
    5.0%
    $3.5
    ($3.0)
    $2.5
    (1.0)
    $1.5
    $3.0
    $0.0
    $0.0

    $10.0
    ($7.5)
    75.0%
    ($0.50)
    5.0%
    $3.5
    ($3.0)
    $2.5
    (1.0)
    $1.5
    $3.0
    $0.0
    $0.0

    $10.0
    ($7.5)
    75.0%
    ($0.50)
    5.0%
    $3.5
    ($3.0)
    $2.5
    (1.0)
    $1.5
    $3.0
    $0.0
    $0.0

    ($18.0)

    $2.5

    $3.9

    $4.5

    $4.5

    $4.5

    $10.0
    ($7.5)
    75.0%
    ($0.50)
    5.0%
    $3.5
    ($3.0)
    $2.5
    (1.0)
    $1.5
    $3.0
    $0.0
    $0.0
    1.0
    1.1
    $6.6

    Periods to discount
    Discount factor
    Discounted free cash flows

    1.0
    0.926
    ($16.7)

    2.0
    0.857
    $2.1

    3.0
    0.794
    $3.1

    4.0
    0.735
    $3.3

    5.0
    0.681
    $3.1

    6.0
    0.630
    $2.8

    7.0
    0.583
    $3.8

    NPV
    IRR

    $1.6
    10.7%

    WACC Calculation
    (in millions)
    Long Term Debt
    Bank Loan Payable
    Net Debt

    $2,500.0
    $500.0
    $3,000.0

    Current shares outstanding


    Current share price
    Market Capitalization

    500
    $24.0
    $12,000.0

    Long term debt / Total Capitalization


    Bank Loan / Total Capitalization
    Market Cap. / Total Capitalization

    16.7%
    3.3%
    80.0%

    Bank loan rate(LIBOR +1)


    Long term debt rate(A rated bond)
    Tax rate
    Risk-free interest rate
    Levered beta
    Market risk premium
    Cost of Equity
    WACC

    2.15%
    3.85%
    40.00%
    2.04%
    1.10
    6.00%
    8.64%
    7.34%

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