1. What is the nature of the investment that is under consideration, and what are the sources of value (cost savings and revenue increases)?

2. Itemize the cash flows for each of the six years of the investment.

3. What are the components of the cost of capital and the weights used to get WPC’s WACC?

4. What are the NPV and the IRR of the resulting cash flows? How do you interpret these numbers?

5. What changes would you make to these base-case numbers?

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 works well for all audiences who are learning the basics of discounted cash flow and investment analysis. I have used it successfully with executives as an in-class exercise following introductory classes on cash flows, discounted cash flow, and cost of capital. I encourage participants to work in groups of two or three to bring together the concepts of the earlier classes in this simple but comprehensive, capital-investment example.