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    Fonderia Di Torino Case Study

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    Muhammad MBA65
    The document analyzes the economic benefits of acquiring a new Vulcan mold-maker machine for Fonderia di Torino. It finds that the initial investment is $813,296.25 after accounting for capital losses from selling old machines. Over 8 years, total expenses will be lower with the new machine. With a discount rate of 8%, the NPV is positive for 3 scenarios analyzed: 1) inflation of 3% and laying off old workers, 2) inflation of 3% and hiring janitors, 3) inflation of 5.8% and laying off workers. The recommendation is for Fonderia di Torino to invest in the new machine as it is considered feasible and will increase productivity and profits.

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    Fonderia Di Torino Case Study

    Uploaded by

    Muhammad MBA65
    280 views18 pages
    The document analyzes the economic benefits of acquiring a new Vulcan mold-maker machine for Fonderia di Torino. It finds that the initial investment is $813,296.25 after accounting for capital losses from selling old machines. Over 8 years, total expenses will be lower with the new machine. With a discount rate of 8%, the NPV is positive for 3 scenarios analyzed: 1) inflation of 3% and laying off old workers, 2) inflation of 3% and hiring janitors, 3) inflation of 5.8% and laying off workers. The recommendation is for Fonderia di Torino to invest in the new machine as it is considered feasible and will increase productivity and profits.

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    Fonderia Di Torino Case Study (1)

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    The document analyzes the economic benefits of acquiring a new Vulcan mold-maker machine for Fonderia di Torino. It finds that the initial investment is $813,296.25 after accounting for capital losses from selling old machines. Over 8 years, total expenses will be lower with the new machine. With a discount rate of 8%, the NPV is positive for 3 scenarios analyzed: 1) inflation of 3% and laying off old workers, 2) inflation of 3% and hiring janitors, 3) inflation of 5.8% and laying off workers. The recommendation is for Fonderia di Torino to invest in the new machine as it is considered feasible and will increase productivity and profits.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    280 views18 pages

    Fonderia Di Torino Case Study

    Uploaded by

    Muhammad MBA65
    The document analyzes the economic benefits of acquiring a new Vulcan mold-maker machine for Fonderia di Torino. It finds that the initial investment is $813,296.25 after accounting for capital losses from selling old machines. Over 8 years, total expenses will be lower with the new machine. With a discount rate of 8%, the NPV is positive for 3 scenarios analyzed: 1) inflation of 3% and laying off old workers, 2) inflation of 3% and hiring janitors, 3) inflation of 5.8% and laying off workers. The recommendation is for Fonderia di Torino to invest in the new machine as it is considered feasible and will increase productivity and profits.

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    You are on page 1of 18

    FINANCE

    MANAGEMENT

    Fonderia di Torino
    Case Study

    SINDIKAT 2
    What is the initial investment required?
    Total investment of new machine is $1.01 million, but
    Assess the economic with the Capital Loss from the Sale of the old
    benefits of acquiring the machines deducted from the overall asset acquisition
    Vulcan mold-maker cost, the initial outlay will be much less.
    New Machine Capital Expenditure: $813, 296.25
    machine. What is the initial
    investment required? What
    are the benefits over time?
    What is the appropriate
    discount rate? Does the
    NPV justify the investment
    in the machine?
    What are the benefits over time?

    Comparing Old and New


    Machine, over time the Total
    Expense for 8 years are going
    to be less is we choose New
    Machine.
    What is the appropriate
    discount rate?
    Comparison
    Scenario 1 : Buying the New Machine and Layoff the
    Excess Employees
    What uncertainties or qualitative considerations might influence your recommendation?
    How would an inflation rate of 3% or higher affect the attractiveness of the Vulcan mold-
    maker machine? Please estimate the impact on NPV from a change in any of the elements.

    SCENARIO 1
    SCENARIO 1
    NPV
    SCENARIO 1
    With the 1st Scenario, when the conditions are: an inflation
    of 3%, Fonderia buying the new machine, laying off all old
    workers, and no rehiring of old workers; the NPV will be
    positive (NPV= € 152.923,23). For this scenario, Fonderia di
    Torino should invest in the New Machine.
    Scenario 2 : Buying the New Machine and Layoff the
    Excess Employees
    Secenario 2
    SCENARIO 2
    NPV
    SCENARIO 2
    With the 2nd Scenario, When there is
    an inflation of 3%, Fonderia buying
    the new machine, laying off all old
    workers, and also hiring janitors
    1p/shift. The NPV will be positive
    (NPV= $ 89,284). For this scenario,
    Fonderia di Torino should invest in
    the New Machine
    Secenario 3 Buying the New Machine and Layoff the
    Excess Employees
    Secenario 3
    Secenario 3
    NPV
    SCENARIO 3
    With the 3rd Scenario, When there is
    an inflation of 5,8%, Fonderia buying
    the new machine, and laying off all old
    workers, The NPV will be positive
    (NPV= $ 224.118). It can be conclude
    that for scenario 3, Fonderia di Torino
    should invest in the new Machine.
    Conclusion & Recommendation
    Based on the calculation, we choose the
    new machine as the best alternative for
    Fonderia di Torino. But, there will be The advice that can be given is the company
    the disadvantages by purchasing the
    should implement the investment plan
    new machines. Using a new machine
    means the company only needs three
    because the plan is considered feasible to be
    workers, so it will cause layoff for implemented in order to increase the
    workers. The company can reassign the productivity of the new machine so that the
    workers to other jobs (e.g. Janitors) profit made by companies getting bigger
    might be easier. And if the workers are
    reassigned as janitors, NPV will
    decrease due to increase in labor costs.

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