Instructional Case: Evergreen Forests Limited.

This case concerns the valuation of a newly listed forestry company and is suitable for M.B.A. or an advanced financial statement analysis class. The long-term and pure forestry nature of the company also provides an ideal background for students to consider several issues in accounting, financial statement analysis and finance. The case requires students to forecast cash flows, income statements and balance sheets. While this is a relatively mechanical assignment, the long-term nature of forestry is ideal for spreadsheet use and to provide students with the opportunity to model the articulation between financial statements. It also raises issues concerning the use of nominal or real cash flows and how to measure the terminal value. The cash flows are then used as a basis for a valuation. The valuation involves determining the cost of capital, conducting sensitivity analysis on value-drivers and providing a discussion of operating flexibility and real options. The case study was adapted from publicly available documents.