Weyerhaeuser Company grows, harvests, and processes timber and develops residential real estate. Incorporated in Washington State, the company has four business segments: timberlands; wood products; pulp, paper, and packaging; and real estate. The company manages 5.3 million acres of commercial forestland, 5.1 million of them company-owned, with 3.3 million acres in the southern United States and 2 million acres in the Pacific Northwest. The standing timber inventory on these lands was approximately 9.4 million cunits as of early 1999 (a cunit is 100 cubic feet of solid wood). The wood products division of Weyerhaeuser is the world's largest producer of commercial-grade softwood timber and also produces coated ground wood and coated freesheet. Weyerhaeuser's pulp, paper, and packaging division is the world's largest producer of pulp and a leading producer of corrugated containers. The real estate operations involve homebuilding.
Segments contributed to total revenues and total operating income in 1998 as follows:

Exhibit 3.1 presents Weyerhaeuser's 1998 income statement and balance sheet. The notes refer to footnotes to the financial statements that can be found on the SEC's EDGAR Web site.
A. List the assets and liabilities on the balance sheet that you think are probably close to market value.
B. Consider assigning a market value to the assets and liabilities you have not put on the list. Use the following information. Analysts estimate that the timberlands in the South are worth $1,000 per acre and those in the Pacific Northwest $2,000 per acre. Valuers estimate the replacement cost of plants used in producing pulp, paper, and packaging to be $12,500 million and those producing wood products to be $2,100 million. Market values are not available for the homes being built or for the land held for building homes, but firms with similar operations sell at seven times pretax earnings.
C. Prepare a balance sheet that purports to give the value of the equity. What do you estimate to be the intrinsic premium?
D. What reservations do you have about the process? What other approaches do you recommend? For reference, Weyerhaeuser's shares traded at $54 in March 1999, when its annual report wasreleased.

Percent of Revenue Percent of Operating Income Tinberiands and wood products Pulp, paper, and packaging Real estate Corporate operations 475% 40.1 741% 18.2 10.9 (3.2) 11.1 1.3