Introduction Aurora Textile Company having over 100 years history has been producing cotton and synthetic/cotton blend yarns to textile industry consisting of U.S. and the international market. The majority of the company’s revenue came from the domestic market and revenue sources for Aurora consist of the hosiery market accounting for 0.43‚ the knitted-outwear market accounting for 0.35‚ the wovens market accounting for 0.13‚ and industrial and specialty products accounting for remaining 0.09
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Case 20: Aurora Textile Company GROUP QUESTIONS Learning Objectives: 1. The basics of incremental-cash-flow analysis: identifying the cash flows relevant to a capital-investment decision 2. The construction of a side-by-side discounted-cash-flow analysis for a replacement decision 3. How to adapt the NPV decision rule to a troubled industry 4. The recognition that a reduced investment horizon is a significant consequence of financial distress 5. The importance of sensitivity analysis
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PART I Review & study of the past and present situations of the company Brief Historical Review 1901 John F. Queeny founds the original Monsanto. He used capital from a soft drink company to start Monsanto. 1920 Monsanto expanded into basic industrial chemicals like sulfuric acid. 1940 It became a leading manufacturer of plastics‚ including polystyrene‚ and synthetic fibers. 1970 Monsanto is the leading producer of Agent Orange for US Military operations in Vietnam. 1973 Monsanto began manufacturing
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Case 20: Aurora Textile Company Summary: In early 2003‚ Michael‚ CFO of Aurora Textile Company‚ is deciding whether or not to install a new machine called Zinser 351 in order to save the declined sales and increase its competitive force. In deciding whether or not to invest Zinser 351‚ it is important to get the NPV and the payback period. To get the NPV and the payback period‚ we firstly need to forecast the future cash flows that the new machine will generate. We found the ten-year NPV to be
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Introduction Aurora Textiles is a textile company that specializes in hosiery‚ knitted outerwear‚ woven‚ and industrial and specialty products. They develop finished fabric to meet specific needs as the leading yarn manufacturer established in the 1900s. However‚ both Aurora and the whole U.S. textile industry have been struggling financially due to globalization and other external factors. Aurora itself may not have responded quickly enough to the deteriorating business environment and has caused
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SUBJ: Aurora Textile Company EXECUTIVE SUMMARY Aurora Textiles has historically been one of the premier textile companies in the United States and now has a decision to make. With the opportunity to invest in equipment that could help cure our slumping financials‚ we must carefully explore whether this investment is appropriate for a company with such an uncertain future. With that in mind we believe that the Zinser 351 is the perfect investment to pull us out of this slump. As a company that
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Beauregard Textile Company: When in 1990 Calloway and Clarence Beal raised the price of the Triaxx-30 was to reflect the same increase in the costs. This is good example of our global economic situation. Costs are rising therefore also the price at which products or services are sold have to keep up. A second purpose was to make money and the rights amount of funds for a long-term plan of expansion. What the firm did mainly wrong was they predicted a decrease in demand for the T-30 fabric
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Auora Textile Company Case Study Industry Cheaper production costs Industry shift Consumer preferences Increased IT liability Auora Overview Established in early 1900s Hosiery Knitted Outerwear Wovens Industry Specialty Products 90% revenue in U.S. market Ratio Graphs Alternatives Problem: Should Aurora Textile Company install the Zinser 351 to replace its older-generation machine? The Zinser 351 Advantages: Produce a finer-quality yarn Increase efficiency Greater reliability Disadvantages:
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Aurora Textile Company Inc Case Study Finance 450 I. Recommendations Aurora Textile Company is currently not in very good financial situation. Based on calculations that I made for the capital budgeting‚ my recommendation is to buy the new Zinser machine. After computing the NPV for the project it came out to be $10‚160‚579 over the period of 10 years. According on the analysis of the CFO of the company‚ Zinser would produce a finer- quality yarn that would be used for higher quality and higher
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Executive Summary In a desire to increase the company’s working capital for the company’s future financial investment in a plant modernization and expansion program‚ Beauregard Textile Company increased the price of its Triaxx-30 product to bring its profit margins up to that of their other products. In a sequential-move game theory Calhoun & Pritchard‚ Beauregard’s primary rival‚ did not raise its price even though its costs were assumed to be similar. As a result‚ Beauregard’s unit sales dropped
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