Business Case Studies & Business Publications

Northern Paper

Eades, Kenneth M.,...

Case

Northern Paper

Eades, Kenneth M.; Schill, Michael J.

F-2146 | Published March 4, 2026 | 3 Pages Case

Collection: Darden School of Business

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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.

The case touches on the following capital-investment topics: estimation of relevant cash flows (both cost savings and increased revenues); the influence of taxes, including incremental profit, depreciation, and capital gains effects; the effect of net working capital (NWC) on cash flow; and the component costs of capital as determined by current market conditions and weighted average cost of capital (WACC) as the discount rate.