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Perform a net present value analysis of the sheeter replacement decision. While it is 

possible to perform such an analysis looking at the changes in all cost items, for this 

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analysis, please calculate (1) the present value of future costs assuming the old sheeter is RETAINED  and 

(2) the present value of future costs assuming the old sheeter is REPLACED. 

The net present value of the replacement decision will be the difference between these two values.   (Please create 2 timelines -second timeline you’ll need to adjust the costs to reflect that of the new machine.) 

Title 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 $915 a ton.
Exhibit 1
CARDED GRAPHICS, LLC: SHEETER REPLACEMENT DECISION
Income Statements
200720082009
Sales$ 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
200720082009
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
SharesShareBookYield
RevenueOutstandingPriceValueon LTDebt
Ticker(millions)Beta(millions)(12/28/09)LT DebtDebtRating
Packaging Companies
Graphic Packaging HoldingGPK$ 4,0951.50343$ 3.47$ 2,8928.47%B
International PaperIP$ 23,3661.45433$ 26.78$ 8,7295.47%BBB
Packaging Corp. of AmericaPKG$ 2,1481.15103$ 23.01$ 5714.61%BBB
RockTennRKT$ 2,8121.1039$ 50.41$ 1,2937.78%BB+
Sonoco ProductsSON$ 3,5971.00100$ 29.25$ 4624.86%BBB+
Paper Companies
Neenah PaperNP$ 5741.3015$ 13.95$ 2647.86%BB-
Temple-InlandTIN$ 3,5770.88107$ 21.11$ 2,8505.87%BBB
Verso Paper Corp.VRS$ 1,3610.9252$ 2.61$ 1,1928.48%B
Typical Industry Clients
General MillsGIS$ 14,6910.50328$ 70.81$ 5,7553.89%BBB+
PepsiCoPEP$ 43,2320.601,565$ 60.80$ 7,4003.52%A-
TargetTGT$ 65,3571.05753$ 48.37$ 15,1183.72%A+
Wal-MartWMT$ 408,2140.603,925$ 53.45$ 36,4013.71%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 Premium6.00%
U.S. Government Bond Yields
2-year1.14%
5-year2.69%
10-year3.85%
30-year4.63%
Corporate Bond Yields (long-term)
AAA5.26%
AA5.44%
A5.77%
BBB6.37%
Data sources: U.S. Federal Reserve and Mergent Bond Record.

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