Vesuvio Fonderia S.P.a
1. Please assess the economic benefits of acquiring the Bond-O-Matic molding machine, first by projecting the cash flows of both alternatives of the next 24 years, and then by computing the EAC assuming the Bond-O-Matic has a life of 8 years, and the SemiAutomatic has a life of 6 years. 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?
2. What uncertainties or qualitative considerations might influence your recommendation? How, if at all, would an inflation rate of 10 percent (or higher) affect the attractiveness of the Bond-O-Matic? Please estimate the impact on NPV from a change in any of these elements.
3. Should Angela Lombardi proceed with the project? There should be a full discussion after viewing the sensitivity analysis. Think broadly in economic and strategic terms and include qualitative factors in your decision. MAKE A DECISION and defend it.
Hints: Your answer will be in lira. Use the template provided. A shift is 8 hours. The number of work days per year is 210. Both alternatives will produce a negative cash flow. Which alternative produces the best result? Compute the cash flows of each alternative, and then the NPV and EAC of the difference. The choice is whether to remain with the Semi-automatic machines or toe replace them with the Bond-o-matic.
Labor factor means the extent to which the wages of the semi-automated machine operators can be eliminated. A “0” labor factor means that all semi-automated machine workers are laid off. A “1” labor factor means that all semi-automated machine workers are retained at full
2. What uncertainties or qualitative considerations might influence your recommendation? How, if at all, would an inflation rate of 10 percent (or higher) affect the attractiveness of the Bond-O-Matic? Please estimate the impact on NPV from a change in any of these elements.
3. Should Angela Lombardi proceed with the project? There should be a full discussion after viewing the sensitivity analysis. Think broadly in economic and strategic terms and include qualitative factors in your decision. MAKE A DECISION and defend it.
Hints: Your answer will be in lira. Use the template provided. A shift is 8 hours. The number of work days per year is 210. Both alternatives will produce a negative cash flow. Which alternative produces the best result? Compute the cash flows of each alternative, and then the NPV and EAC of the difference. The choice is whether to remain with the Semi-automatic machines or toe replace them with the Bond-o-matic.
Labor factor means the extent to which the wages of the semi-automated machine operators can be eliminated. A “0” labor factor means that all semi-automated machine workers are laid off. A “1” labor factor means that all semi-automated machine workers are retained at full