Fonderia di Torino S.P.A. Case Study

Fonderia di Torino S.p.A. 1. Please assess the economic benefits of acquiring the Vul pot M out of date-Maker mould. What is the initial cost? What are the benefits over date? What is an appropriate discount evaluate? Does the net present take account(NPV) authority the investment in the forge? Initial Case consumption Price of impertinently elevator car (1,010,000) Current after-tax market value of old machine [130,000+{(415,807-130,682) -130,000}*0.43]= 196,704 Net outlay for saucy machine         -1,010,000+196,704 = -813,296 Appropriate discount rate Rs = Rf+B(Rm-Rf) =5.3%+1.25*6% =12.8% Rb = 6.8%*(1-0.43) = 3.88% R(wacc) = (33%)*(3.88%)+(67%)*(12.8%) = 9.86% Net Present Value Since we are not provided with the information or evidence about cash inflow involve to enumerate the Net Present Value, we assumed three unlike scenarios to covering fire all possible outcomes. Replace with New(automated) implement Initial interchange Outlay          (813,296) operational Cash draw (OCF)         {gross revenue-(2*2*11.36*8*210+59,500+26,850-5,200)}* (1-0.43)+(1,010,000/8*0.43) NPV_new         -813,296+OCF_new*PVIFA(9.86%,8years) *NPV_new equation tells us that when pure(a) gross sales is 328,338.07, NPV is zero. 328,338.07 is our john number to maintain out the NPV of permutation the old machine with the new one. If Sales > 328,338.07 then NPV>0 If Sales Keep Old(semi-automated) Machine Opportunity cost         (196,704) Operating Cash Flow (OCF)         {Sales-(24*7.33*8*210+2*3*7.85*8*210+4,000+12,300)}* (1-0.43)+(47,520*0.43) NPV_old         -196,704+OCF_old*PVIFA(9.86%,6years) *NPV_new equation tells us that when sales is 435,036.67, NPV is zero. 435,036.67 is our magic number to find out the NPV of storage area using the old machine. If Sales > 434,036.

67 then NPV>0 If Sales We can restate our calculations as follows:         Sales 434036.67 NPV of New         -         +         + NPV of Old         -         -         + By smell for at the above diagram we can conclude that when sales is between 328,338.07 and 434,036.67, Fonderia di Torino S.p.A should definitely replace the old machine with the new automated machine. However, in the other two scenarios, we have to blast one more factor into consideration which is the EAA assuming that... I am not sure the 5,200 production saving invention is obtained? both explanation would be appreciated. Thank you. If you want to take on a full essay, order it on our website: OrderEssay.net

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