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IMPORTANT: Case write-ups MUST include Excel outputs. You MUST email me your excel files that you use to conduct your analysis. You WILL lose points for lack of clarity and verbosity. Keep your answers simple and to-the-point. 1. What is the outlook for linerboard prices? What is the outlook for the profitability of the linerboard industry in the short and long term? o Assume that new capacity is added once the price of linerboard reaches $450 per ton (nominal). Any new capacity addition is lumpy and additions can be expected from many current linerboard and corrugated box producers. o Assume that at a price of $475 per ton for linerboard, alternative packaging materials like plastic wrap may be more economical for smaller items. 2. What is the value of the linerboard and box mill operations of Royal Paper Corporation? What value, if any, should be assigned to the years after 1993? To answer this question, you would need to consider the following issues: a. To calculate value after 1993: Assume the firm operates the plants till 1998, fully depreciates the remaining book value of the plants on a straight line basis over four years, and operating profit before depreciation and taxes are fixed at 1993 levels. Also assume that no new capital expenditure is expected during this time on the plants, and that the plants are shut down at the end of 1998. Assume that the plants cannot be sold off and are abandoned. b. How would you estimate a discount rate to value the cash flows? i. What is the weight of debt and equity (required for the purchase price). Consider the fact that Atlantic does not want to slip below its current BBB rating. ii. Estimate the cost of debt. iii. Estimate cost of equity. Assume that the market risk premium is 8.4%. iv. Estimate the WACC.

3. Would you acquire Royal’s linerboard and box mill operations? a. What price would you be willing to pay? Give specific reasons for your answer. (General and vague...