CARDED Graphics replacement decision NPV analysis
QueenEsther
Financials-CardedGraphics5.xlsxTitle Page
| This spreadsheet supports STUDENT analysis of the case “Carded Graphics, LLC: Sheeter Replacement Decision” (UVA-F-1606). | |
| This spreadsheet was prepared by Associate Professor Marc Lipson. Copyright © 2009 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. For customer service inquiries, send an e-mail [email protected]. No part of this publication may be reproduced, stored in a retrieval system, posted to the Internet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. | |
| Rev. Jun. 21, 2012 | |
Exhibit 1
| Notes for Group C | |||
| New Sheeter: 40 ton capacity per day | |||
| Old Sheeter: 10 ton capacity per day | |||
| FY09 production: 16 tons per day. This amount will climb with growth projections | |||
| Precut paper is selling at $1,009 a ton. | |||
| Roll paper is selling at $915 a ton. | |||
| Exhibit 1 | |||
| CARDED GRAPHICS, LLC: SHEETER REPLACEMENT DECISION | |||
| Income Statements | |||
| 2007 | 2008 | 2009 | |
| Sales | $ 9,398,775 | $ 10,593,220 | $ 14,100,514 |
| Cost of Goods Sold | $ 7,410,572 | $ 8,699,476 | $ 11,276,894 |
| $ 1,988,203 | $ 1,893,744 | $ 2,823,620 | |
| Selling and Administrative | $ 1,159,635 | $ 1,409,408 | $ 1,667,717 |
| Other Expenses | $ 27,495 | $ (88,528) | $ (70,951) |
| $ 1,132,140 | $ 1,497,936 | $ 1,738,668 | |
| Earnings Before Interest and Taxes | $ 801,073 | $ 572,864 | $ 1,226,854 |
| Interest Expense | $ 415,848 | $ 831,968 | $ 937,967 |
| Income Before Taxes | $ 385,225 | $ (259,104) | $ 288,887 |
| Taxes | $ 128,918 | $ (207,373) | $ 52,689 |
| Net Income | $ 256,307 | $ (51,731) | $ 236,198 |
| Data source: Carded Graphics financial statements. | |||
Exhibit 2
| Exhibit 2 | |||
| CARDED GRAPHICS, LLC: SHEETER REPLACEMENT DECISION | |||
| Balance Sheets | |||
| 2007 | 2008 | 2009 | |
| Cash | $ 182,493 | $ 32,286 | $ 489,286 |
| Accounts Receivable | $ 1,050,207 | $ 959,361 | $ 1,229,704 |
| Inventory | $ 1,761,583 | $ 1,858,447 | $ 2,156,091 |
| Deferred Taxes and Other | $ 187,370 | $ 221,694 | $ 225,474 |
| $ 3,181,653 | $ 3,071,788 | $ 4,100,555 | |
| Goodwill | $ 612,968 | $ 688,755 | $ 707,802 |
| Land and Buildings | $ 88,792 | $ 4,896,565 | $ 4,896,565 |
| Equipment | $ 5,139,743 | $ 9,096,829 | $ 9,203,126 |
| $ 5,841,503 | $ 14,682,149 | $ 14,807,493 | |
| Accumulated Depreciation | $ 1,714,099 | $ 2,244,921 | $ 2,951,139 |
| $ 4,127,404 | $ 12,437,228 | $ 11,856,354 | |
| $ 7,309,057 | $ 15,509,016 | $ 15,956,909 | |
| Line of Credit | $ 1,055,957 | $ 1,093,022 | $ 1,083,330 |
| Current Long-Term Debt | $ 660,370 | $ 759,846 | $ 986,531 |
| Accounts Payable | $ 664,027 | $ 1,248,788 | $ 1,837,000 |
| Accrued Expenses | $ 162,730 | $ 147,293 | $ 213,981 |
| $ 2,543,084 | $ 3,248,949 | $ 4,120,842 | |
| Long-Term Debt, Net of Current Due | $ 2,746,111 | $ 9,552,502 | $ 9,181,349 |
| Deferred Income Taxes | $ 323,377 | $ 370,190 | $ 389,223 |
| $ 3,069,488 | $ 9,922,692 | $ 9,570,572 | |
| Shareholders’ Equity | $ 1,696,485 | $ 2,337,375 | $ 2,265,495 |
| $ 7,309,057 | $ 15,509,016 | $ 15,956,909 | |
| Inventory Detail | |||
| Raw Materials | $ 242,479 | $ 311,368 | $ 448,040 |
| Supplies | $ 120,773 | $ 110,974 | $ 157,432 |
| Work-In-Process | $ 365,655 | $ 224,535 | $ 219,978 |
| Finished Goods | $ 1,032,676 | $ 1,211,570 | $ 1,330,641 |
| $ 1,761,583 | $ 1,858,447 | $ 2,156,091 | |
| Data source: Carded Graphics financial statements. |
Exhibit 4
| Exhibit 4 | ||||||||
| CARDED GRAPHICS, LLC: SHEETER REPLACEMENT DECISION | ||||||||
| Industry Financial Data by Company | ||||||||
| Shares | Share | Book | Yield | |||||
| Revenue | Outstanding | Price | Value | on LT | Debt | |||
| Ticker | (millions) | Beta | (millions) | (12/28/09) | LT Debt | Debt | Rating | |
| Packaging Companies | ||||||||
| Graphic Packaging Holding | GPK | $ 4,095 | 1.50 | 343 | $ 3.47 | $ 2,892 | 8.47% | B |
| International Paper | IP | $ 23,366 | 1.45 | 433 | $ 26.78 | $ 8,729 | 5.47% | BBB |
| Packaging Corp. of America | PKG | $ 2,148 | 1.15 | 103 | $ 23.01 | $ 571 | 4.61% | BBB |
| RockTenn | RKT | $ 2,812 | 1.10 | 39 | $ 50.41 | $ 1,293 | 7.78% | BB+ |
| Sonoco Products | SON | $ 3,597 | 1.00 | 100 | $ 29.25 | $ 462 | 4.86% | BBB+ |
| Paper Companies | ||||||||
| Neenah Paper | NP | $ 574 | 1.30 | 15 | $ 13.95 | $ 264 | 7.86% | BB- |
| Temple-Inland | TIN | $ 3,577 | 0.88 | 107 | $ 21.11 | $ 2,850 | 5.87% | BBB |
| Verso Paper Corp. | VRS | $ 1,361 | 0.92 | 52 | $ 2.61 | $ 1,192 | 8.48% | B |
| Typical Industry Clients | ||||||||
| General Mills | GIS | $ 14,691 | 0.50 | 328 | $ 70.81 | $ 5,755 | 3.89% | BBB+ |
| PepsiCo | PEP | $ 43,232 | 0.60 | 1,565 | $ 60.80 | $ 7,400 | 3.52% | A- |
| Target | TGT | $ 65,357 | 1.05 | 753 | $ 48.37 | $ 15,118 | 3.72% | A+ |
| Wal-Mart | WMT | $ 408,214 | 0.60 | 3,925 | $ 53.45 | $ 36,401 | 3.71% | AA |
| Data sources: Company annual reports, moneycentral.msn.com, Value Line, Yahoo! Finance, Bloomberg. | ||||||||
| Note: Yields on long-term debt based on maturity close to 2020. |
Exhibit 5
| Exhibit 5 | |
| CARDED GRAPHICS, LLC: SHEETER REPLACEMENT DECISION | |
| Capital Market Data as of December 28, 2009 | |
| Estimated Market Premium | 6.00% |
| U.S. Government Bond Yields | |
| 2-year | 1.14% |
| 5-year | 2.69% |
| 10-year | 3.85% |
| 30-year | 4.63% |
| Corporate Bond Yields (long-term) | |
| AAA | 5.26% |
| AA | 5.44% |
| A | 5.77% |
| BBB | 6.37% |
| Data sources: U.S. Federal Reserve and Mergent Bond Record. | |
