Fonderia Di Torino S.P.A. - 1704 Words

In order to determine the attractiveness of the investment it is important to determine the financial impact that the new Vulcan mold-maker will have on the firm if it replaces their current machines. It will be necessary to take into consideration both quantitative and qualitative measures. This project should be considered an independent project that is accepted or rejected on its own merits. The project will be decided from a cost/benefit standpoint by looking at the project s projected discounted cash flows, the calculated NPV of the project, the IRR and PI. Finally, the project s other qualitative advantages and disadvantages must also be considered before the project is accepted or rejected. Question 1: What is the basic nature†¦show more content†¦What DCF did you get? Answer: Price of new machine = (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 new 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 needed to calculate the Net Present Value, we assumed three different scenarios to cover all possible outcomes. Replace with New (automated) Machine Initial Cash Outlay = (813,296)Show MoreRelatedFonderia Di Torino S.P.A.1148 Words   |  5 PagesFinance Case Study: Fonderia di Torino S.p.A. Case Overview: Company considering purchase of Vulcan Mold-Maker automated molding machine. Machine prepares sand molds into molten iron using iron castings, automates manual intensive process. Questions: 1. Assess the economic benefits of acquiring the Vulcan Mold-Maker machine. What is the initial outlay? What are the benefits over time? What is an appropriate discount rate? Does the net present value (NPV) warrant the investment in theRead MoreEssay on Fonderia Di Torino S.P.A.1076 Words   |  5 PagesFonderia di Torino S.P.A. Case analysis report Fonderia di Torino S.p.A, founded in 1912 by Benito Cerini, was a manufacturing company who produced metal castings using semi-automated molding machines. The company’s main line of business was the production of precision metal castings for use in automotive, aerospace, and construction equipment. The company excelled at this and was awarded because of the quality of its products. The mainly European customers of Fonderia di Torino were original-equipmentRead MoreFonderia Di Torino S.P.a Essay727 Words   |  3 PagesFonderia di Torino, S.p.A Midterm Individual Case Fonderia di Torino, S.p.A is a manufacturing company who produces metal castings using six semi-automated molding machines. However, they are currently considering purchasing a Vulcan Mold-Maker machine to replace the six machines currently in place. The firm needs to consider all costs in deciding whether to keep the current machines or purchase the Vulcan Mold-Maker. Buying the Vulcan machine will result in year 0 outflows of 1.01 millionRead MoreFonderia di Torino S.P.A. Case Study860 Words   |  4 PagesFonderia di Torino S.p.A. 1. Please assess the economic benefits of acquiring the Vulcan Mold-Maker machine. What is the initial outlay? What are the benefits over time? What is an appropriate discount rate? Does the net present value(NPV) warrant the investment in the machine? Initial Case Outlay Price of new machine (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 new machine -1,010,000+196,704 = -813,296 Appropriate