...1. Question: Explain the importance of risk adjustment in the capital budgeting allocation process by answering the following questions. a. Explain why risk adjustments are important and how they can affect firm value. b. Explain how the single hurdle rate currently used by Northern Forest Products can change the risk structure of the company. For example, think about what would happen if the Plastic Products Division received a disproportionately high level of funding because their returns exceed the company hurdle rates (its growth rate substantially exceeds the corporate average). Assuming that the risk of the division remains unchanged, what effect would this have, over time, on NFP’s corporate beta and on the overall cost of capital? ______________________________ a. In reality, business firms may have various divisions with different level of risk and capital structure. Risk adjustments therefore are important because each project would not be properly evaluated if its hurdle rate was based on the firm’s overall risk only. In other words, the firm’s hurdle rate should be adjusted to better reflect the risk of each division in which it considers investing. Without proper risk adjustments, the firm’s stock may lose value by taking on unacceptable high-risk projects or rejecting acceptable low-risk projects. Failure in adjusting risk for divisions is often due to poor financial management performance, which later brings about incorrect estimate of the division’s...
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...the most famous case regarding the Environmental Species Act is that pertaining to the northern spotted owl. The controversy of the northern spotted owl’s endangered status lies in the fact that spotted owls reside in old-growth forests that are found primarily in the Pacific Northwest. It is these same old-growth forests that are desirable to the logging industry (Foley, 1992). In 1990 the northern spotted owl was listed as threatened by the U.S. Fish and Wildlife Service despite having been informally recognized as possibly endangered since 1973 (Foley, 1992). Historically the northern spotted owl inhabited much of the Pacific Northwest. The owls prefer the Pacific Northwest location for its old growth forests. Old growth forests are defined as forests in which the trees are 150-200+ years old have characteristics not found in younger forests. Due to the age of trees in an old growth forest most recognized old growth forests have never been logged by humans. In old growth forests the spotted owl benefits from close and multi-layered canopies. They also benefit from having a variety of tree species with some trees dead, fallen, or with their tops broken off. The owl uses partially hollowed out dead or misshapen trees to nest (Northern Spotted Owl). Old growth forests are seen as desirable to loggers for many of the same reasons they are desirable to spotted owls. Loggers look to old growth forests because they provide thick tall trees that produce many products. The thickness...
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...Arauco Case 1. Should Arauco build the Nueva Aldea project? (Hint: Estimate the project Net Present Value and provide a recommendation considering quantitative and qualitative arguments) Qualitative arguments We would suggest the company to go ahead with the the project Nueva Aldea considering next arguments: Horizontal expansion The company Arauco should build the project Nueva Aldea, for various reasons related to production, efficiency, access to lower costs and its growth internationally. Among the reasons that support the construction of the new plant, we consider that Arauco will be located in a specific region (VIII) close to the ports of Lirquén, Coronel and San Vicente where we can find the largest productive plantations and where this strategic position would favors the mobilization of processed materials, key point of analysis to promote the expansion and interconnection of a company of this magnitude. Also have a perfect access to the central power grid, which would significantly reduce the cost of electricity transmission. In addition to the strategic location also would exist benefits regarding transdisciplinary work between different plants. Benefits that result in a consistent process integration, cross information, facilitating learning, technological exchange and decreased bureaucracies, all factors which contribute to the improvement of production processes and efficiency. In relation to economies of scope, this new project would achieve...
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...Executive Summary Sustainable forest management is first and foremost a local and national responsibility. Nevertheless, there is much to be gained from international cooperation, and many developing countries continue to rely on foreign assistance, including in supporting the sustainable management of forests and other natural resources. However, forests (and other development objectives) often suffer from competing and overlapping priorities both among donors and between donors and national governments. Ensuring effective collaboration among donors and government agencies in developing countries is a prerequisite for improving the governance, monitoring, assessment and management of forests. Developed countries also face challenges associated with competing domestic policy goals that undermine efforts to achieve sustainable forest management. Therefore, more effective communication and coordination across sectors and countries is needed for a sustainable future. In this project we concludes with four broad strategies for a sustainable future: • Plant trees and invest in ecosystem services. • Promote small and medium forest-based enterprises, and gender equity. • Use wood for energy; reuse and recycle wood products. • Enhance communication, and coordinate development. About half the forest managed by Forestry Tasmania are available for sustainable timber production. A network of formal and informal reserves on State forest protects values such as flora, fauna, soil...
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...Despite Benin's small size, the country's landscape varies from Savanna Grasslands (West Sudanian Savanna) to dense forests (Nigerian Lowland forests and Eastern Guinean Forests), with a mixture of the two found in areas such as the Guinean Forest-Savanna Mosaic. The predominant tropical climate found in the region presents two alternating rainy and dry seasons through the year. Lands used for cotton cultivation can be found throughout the country, however, they are mostly concentrated in the northern regions of Benin near Djougou and Bada as seen in the illustration. Oil palm and peanut plantations are mostly found near the coast, along with the areas used for fishing. Currently, Benin experiences many environmental issues; the most critical being "inadequate supplies of potable water; water pollution; poaching threatens wildlife populations; deforestation; desertification" (The World Factbook)...
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...“ADDING VALUE TO NICARAGUAN FORESTRY” ASSET RICH BUT CAPITAL POOR! VALERIA ZELAYA Background During the 70’s and 80’s, Nicaragua suffered from civil and political unrest. In 1990, the country had its first democratic elections in 30 years, which lead to a process of slow political depolarization, and economic recovery. Nicaragua’s Northern Atlantic Autonomous Region (RAAN) is the largest block of tropical forest in Central America and a key source of high value timber for local and international markets. Land classified as suitable for forestry usage occupies about 6.2 million hectares; divided as 1.8 million ha for conservation and 4.4 million ha for sustainable use1. Despite this endowment, Nicaragua’s annual wood exports are only US$15M2, representing 1.75% of Nicaragua’s total export. From these exports, 95% is unprocessed wood and 5% is manufactured goods, indicating a feeble commercialization of value-added wood products. Other neighboring countries with less forest area and potential have much greater export income from wood products. Additionally, private sector investment is limited and small and medium enterprises (SMEs) in the wood sector have difficulty in accessing legal and certified raw material creating inefficiencies in the wood value chain due to a lack of integration and coordination of the value chain. The LAC Facility identified the wood sector as one of the potential sectors for growth due to the availability of hardwood species and a significant number...
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...US E RE VI PR EW O P ON E R LY T Y ± N OF OT C E NG FO A R GE SA LE LEA OR R N CL ING AS SR O Northern Forest Products OM Case 90 Cost of Capital Directed FO R Northern Forest Products (NFP) was established in the 1800s to log timber in the Great North Woods. In response to changing conditions, the company underwent radical changes in the way it operates and currently it is a large multidivisional corporation. The major focus of the company remains managing over one million acres of timber production and overseeing the manufacture of consumer paper products from pulp derived from its land holdings. Over the years the company has diversified into several other related businesses, such as a moderately sized mill that produces paneling and wood flooring. This operation has developed a consistent outlet for all of its output and therefore is stable. The company is also involved in real estate as a result of developing some of the prime lake front properties from its forestlands for residential and private recreational use. Successful property development during the 1970s resulted in expanded real estate holdings. However, residential development was particularly hard hit during a recent economic downturn, and the company struggles in this area. NFP is aware of the increasing international demand for wood products and is concerned about recent environmental pressures concerning logging. The company believes that diversification strengthens...
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...SPRING VALLEY FOREST PRODUCTS CORPORATION Upon returning from his annual two-week vacation in early July of 2002, the treasurer of the Spring Valley Forest Products Corporation, a Mr. Fred Firr, found the firm's audited balance sheet as of June 30 on his desk. Close scrutiny of the company's financial condition as reported in this document suggested to Mr. Firr that the cash flow picture for the enterprise was deteriorating. In times gone by, the firm had been able to maintain sizeable cash balances in its bank of account, Tippecanoe Trust Company, during the major portion of the fiscal year, and had found only modest seasonal borrowings necessary. Recently, however, a lengthening of credit terms to customers necessitated by intense competition in the company's dominant product lines had increased working capital needs quite substantially. Simultaneously, lower selling prices occasioned by the same competition had diminished profit margins. For these reasons, Mr. Firr-who had starred as a quarterback in high school, felt that a careful forecast of funds needs for the remainder of 2002 was in order. Spring Valley Forest Products (SPRIVORPCO) produced plywood paneling and moldings both for lumber wholesalers and major contractors in the north central Indiana area. The verdant Wabash River Valley had proven capable of supporting the lush growths of timber necessary to the company's production activities. Most lumber, however, was purchased from independent farmers and...
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...SPRING VALLEY FOREST PRODUCTS CORPORATION Upon returning from his annual two-week vacation in early July of 2002, the treasurer of the Spring Valley Forest Products Corporation, a Mr. Fred Firr, found the firm's audited balance sheet as of June 30 on his desk. Close scrutiny of the company's financial condition as reported in this document suggested to Mr. Firr that the cash flow picture for the enterprise was deteriorating. In times gone by, the firm had been able to maintain sizeable cash balances in its bank of account, Tippecanoe Trust Company, during the major portion of the fiscal year, and had found only modest seasonal borrowings necessary. Recently, however, a lengthening of credit terms to customers necessitated by intense competition in the company's dominant product lines had increased working capital needs quite substantially. Simultaneously, lower selling prices occasioned by the same competition had diminished profit margins. For these reasons, Mr. Firr-who had starred as a quarterback in high school, felt that a careful forecast of funds needs for the remainder of 2002 was in order. Spring Valley Forest Products (SPRIVORPCO) produced plywood paneling and moldings both for lumber wholesalers and major contractors in the north central Indiana area. The verdant Wabash River Valley had proven capable of supporting the lush growths of timber necessary to the company's production activities. Most lumber, however, was purchased from independent farmers and...
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...September 1, 2012 “ETHICAL DELIMA AT NORTHLAKE” WEEK #3 CASE STUDY SYNOPSIS: Jim McIntosh is a vice president at Amalgamated Forest Products. Amalgamated Forest Products is a pulp and paper company located in the Northern Province on the river. The company is a major source for the local economy; many people depend on the company for their income. Frank is a manager of corporate reporting who reports directly to Jim McIntosh. Frank is a longtime employee of Amalgamated Forest Products and was raised up in the system. Frank’s history is long one with the company that dates back to his father, whom worked at the plant before he did and started after High School just as Frank did. Frank started out as a yard man just like his father before a serious accident injured his leg; Frank then went on to work in the corporate accounting office and later becoming a manager of that section. Jim finds himself in an argument with Frank over some reports he generated on pollution and cost benefit analysis of implementing new strategies to oversee the reduction of pollution into the local river. The pollution report is to be submitted to a subcommittee of legislators to show the effects of the pollution in the river, along with the toll it will take on the production cost of the company. However, Jim feels that Frank’s numbers are not matching with the goal they had discussed prior to the development of report. Additionally, the underlying issue here is the fact that Frank had picked...
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...construction of the Northern Gateway Pipeline. Throughout our brief, we will provide several arguments reinforcing our position. In addition to the questions provided by the Hearing Panel, we found it extremely important and pertinent to address economic implications of the construction and functioning of the pipeline. For this reason, these elements will be discussed in Section IV of our brief. We chose to omit a couple of Questions of Analysis in favour of expanding on others that we felt were more relevant and necessary to our argument. We hold the belief that the potential benefits of the Northern Gateway Pipeline outweigh the potential costs; reasons for which will become evident in this written submission. Section II: Questions of Fact: Answered 1. Will the pipeline be running above or below ground? The vast majority of the pipeline will be buried up to a meter underground. The only exceptions will be select water crossings where it is safer to run the pipeline above the water crossing. (Enbridge Northern Gateway Project, 2013) 2. What is the lifespan of the project? The project will have a lifespan of 30 years (Enbridge Northern Gateway Project). 3. What is being transported in the pipeline? There are 2 pipelines. One is the oil pipeline and the other is the condensate pipeline. They will be transporting petroleum through the oil pipeline (525,000 barrels per day). The condensate pipeline will be transporting condensate, which is a product to thin petroleum...
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...and Daves Financial Management Cases. Supplemental Readings: Study Guide. Course Objectives: To review the theoretical concepts in Corporate Finance and improve financial administration skills through projects problem solving and cases. Lectures, Projects, cases and problem solving approaches will be used to achieve the course objectives. Grading: Grade Percent Points Exams 200 points Excellent 80+ Group Work and Cases 100 points Good 70-79.9 Participation, Indiv. Cases 100 points Average 60-69.9 TOTAL 400 points Passing 50-59.9 Fail Below 50 Percentage Score 400/4=100 You will be penalized for absence, lack of participation or poor performance on reading assignments case assignments and problem assignments You are required to read the assigned chapters and finish the mini case assignments before the class discussion of the assignments. Additional readings and problems may be assigned as needed to supplement the text book. * EACH GROUP WILL TURN IN SIX WRITTEN CASE FOR GRADING PRIOR TO PRESENTATION. Written Case as well as Presentation will be graded. Individual grade for group work will include peer grading of group members. (100 points). - Grade for participation is based on in class attendance, in class performance in cases and class discussion, peer grading,...
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...the discussions, theories and relative case studies from the course. Discuss in your opinion how they could have avoided their ethical dilemma. Illiès Boussaha Student number: 230106913 Due Date: November 7, 2012 Word count: 2057 Maple Leaf Food is a Canadian food processing company that is located in Canada, the U.S, U.K and Asia. Its 100 facilities operates in the food and beverage sector, hiring 23.500 employees around the globe, of whom 1.100 temporary foreign workers. The company was created in 1963 and was originally named Canada Bread Company, Limited. It was, and still is the largest food processor of the country. A few years later, McCain Capital Corporation and the Ontario Teachers Pension Plan Board acquired most of the shares. They are still the main shareholders today. Moreover, the company acquired Olivieri™ Fresh Pasta and Sauces in 1988 and merged with Canada Packers Inc. In 1991. The company bought Canada's largest rendering company, Rothsay, the services provided by Rothsay are linked to environmental sustainability (collecting, processing and recycling animal products). Therefore, Maple Leaf Food seems to be environmentally friendly and thus has accomplished some of its social responsibility. However, in August 2008 the Canadian company faced a crisis. Indeed, Maple Leaf Food was involved in a food borne illness due to some of their products, the bacterium involved is called Listeria...
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...Arauco Case Study Question 1 - Do you think it is a good idea for Arauco to build the Nueva Aldea project? In this question we will be using the DCF technique in order to evaluate the project feasibility: Project name: Nueva Aldea Construction time: 3-4 years, we chose a 4 year construction time because we assumed it will take 3 years of direct constructing and a 1 year for extra delays and administrative procedures. We will also assume that the cost of the construction will be divided evenly between the years. Mill life time: 30-40 years, for the sake of this question we will assume a 35 years lifetime. (P.1 L.10) Expected sales: 350$ million per year at full capacity production. (P.1 L.10) Production Capacity: 700,000 tons of pulp. (P.1 L.9) MES of new pulp mill: 665,000. As of 2004 the minimum efficient scale was 95% of maximum mill capacity. (P.12 L.9) Year of producing | 1 (80% of MES) | 2 (90% of MES) | 3 (100% of MES) | 4-35 (100% of MES) | Capacity usage | 532,000 | 598,500 | 665,000 | 665,000 | (P.12 L.7-8) Cost of production: 197$ per ton. (Exhibit 6) Rate of return: 11%.Chile's expected market return is an indication to the company's project return. (P.12 line 10 from bottom) Depreciation: 44$ per ton. (Exhibit 6) Transportation: 38$ per ton. (Exhibit 6) Export: 85% calculated as average between years. (Exhibit 5) Sunk cost: 150$ million. The first phase of the project is already invested and cannot be returned, thus it is not calculated in the...
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...Impacts on the Livelihoods of Small Farm Holders and the Environment in Southeast Asia Due to the loss of Swidden Agriculture Swidden agriculture is a long standing and common practice in many tropical areas in the World. In Southeast Asia in particular, the method for growing maize, rice and other fruits and vegetables is mainly still Swidden agriculture. The small scale farm holders in Southeast Asia, have used this technique for centuries and to them, it is the only way they know to grow food and keep from going hungry.The term swidden is a hard word to define, being so broad and because many scientists and people have had trouble agreeing on definitions for the term. This and the relatively small amount of research and data on farms that use swidden creates holes in existing literature. An increasing problem that small farm holders who use the practice of swidden are facing is the intervention of governments which has sparked added impacts. Understanding the implications of the demise of swidden and the practice itself by both governments and people, can help small farm holders and communities gain more from the loss. This paper will outline the effects of the loss of swidden agriculture on the environment and livelihoods of people in Southeast Asia and how there can be alternatives. The way that I conducted my research was both the use of the University of Oregon library web access and the Internet for certain clips and videos. Through the library I used peer reviewed...
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