Northern Paper

This case provides a straightforward introduction to assessing cash flows, cost of capital, discounted cash flow (DCF) analysis, and the net present value (NPV) associated with a capital-investment decision. The case works well for all audiences who are learning the basics of DCF and investment analysis. The case is a fictional version of an actual investment decision made by a major paper-products company in the 1990s; it is an update and revision of UVA-F-1372. The case has been used successfully at the University of Virginia Darden School of Business with students and executives as an in-class exercise following introductory classes on cash flows, DCF, and cost of capital. The instructor can 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.