International Paper: Alternatives to the Longwood Woodyard Plant

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Compact case

Case

Reference no. UVA-F-1253

Subject category: Finance, Accounting and Control

Authors: Kenneth M Eades (Darden School of Business, University of Virginia); Brian Kanny (Darden School of Business, University of Virginia)

Published by: Darden Business Publishing

Originally published in: 2000

Version: 03.2001

Length: 5 pages

Topics: Discounted cash flow; Capital budgeting; Capital investment; Internal Rate of Return; Net Present Value

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Abstract

This case is a sequel to ''International Paper: Longwood Woodyard Plant'' (UVA-F-1252). The cases are designed to be taught in sequence. This case presents three alternative proposals to the base-case proposal presented in UVA-F-1252. The student is provided with cash flow data, but must complete the estimation of cash flows in order to make a meaningful comparison across the projects. The case stresses the importance to using net present value (NPV) as the basis for the decision, rather than internal rate of return (IRR) or some other, accounting-based metric, for example.The cases are designed for students who are learning or need a refresher on discounted cash flow analysis. Because of the basic issues covered, the cases work well with undergraduate, MBA and executive audiences.