ttndera 1 1trnt S.I. AGroup 1Ar|f Syamra8ungz|o LeonyIauzanIndra Ard|ant|kema| kezaM|sce|tmoan+ 1atRertund Speclallzed ln Lhe producLlon of preclslon meLal casLlngs for use lnauLomoLlve aerospace andconsLrucLlonequlpmenL CusLomer were Lhe CLM ln Lurope 1912 lounded ln lLaly as Lhe casLlng producer for arnamenL lndusLry 1920Lxpanded Lo AuLomaLlve lndusLry LlsLed on sLock exchange wlLh 33 owned by Cerlnl lamllytmoan+ 1atRertund SLraLeglc alllance wlLh Lhe CLM1Lxchange personnel 21he sharlng of confldenLlal markeL demand lnformaLlon 3rovldlng loan for fonderla Lo supporL caplLal expanslon 4refenLlal poslLlon for blddlng on new conLracLtnantaI 1ata aLe of reLurn on CaplLal deployed 14 ayback of an enLlre lnvesLmenL wlLhln 3 years MarkeL value of company's caplLal was uebL 33 (wlLh lnLeresL 68)equlLy 67 1ax raLe 43 8eLa 123IrthIem 1atRertund lransesca Cerlnl was conslderlng Lhe purchase of a vulcan MoldMaker auLomaLed moldlng machlneIrthIem 1atRertundulfflculLy Lo quanLlfy Lhe purchase declslon 1 Wlll need Lo lay off 24 operaLors of Lhe semlauLomaLed machlnes2 vulcan mold wlll resulL ln hlgher producL quallLy and lower scrap raLes buL Lhls unquanLlflable compeLlLlve lmporLance3 Maxlmum capaclLy ls 30 hlgher buL lorendla was noL sure when added capaclLy would be needed4 Lconomlc news headed for a slowdown CurrenL 6 SemlauoLomaLed machlnary CosL 413807 CumulaLlve depreclaLlon 130682 Avg annual depreclaLlon 47320/year eplacemenL 6 years CurrenL esale value offered 130000 12 workers/shlfL aL 783/hour MalnLanence supplles 4000/year ower cosL 123000/yearttndera MtIdMaRer roduced by AllenLown flrm rlce 850000 (+modification 155,000, +shipping etc total 1.10 mio) uepreclaLed 8 years Labor and oLher cosL needed 2 skllled operaLor- 11.36 / hour ConLracL malnLenance 59,500/year ower cosL 26,850'uItan MtIdMaRerWACC re (L/v) + rd (u/v) (1 Lax raLe)(67 x 128) + (33 x 68 x (1043)WACC re rf + (rm rf)re 33 + 123 (006)re 128AnaI+ssAnaI+ssIn|t|a| Investment for new mach|ne rlce of new machlne CurrenL afLer Lax markeL value of old machlne 1010000 (130000 + (413807 130682)(130000*043) 813296oeratne txoenses Itr J Stenart9resent Mach|ner 1 r 2 r 3 r 4 r S rr 7 r Salarles Lxpenses2933436 2933436 2933436 2933436 2933436 2933436 2933436 2933436MalnLenance Lxpenses 79128 79128 79128 79128 79128 79128 79128 79128LlecLrlclLy Lxpenses 12300 12300 12300 12300 12300 12300 12300 12300CLher expenses4000 4000 4000 4000 4000 4000 4000 40001oLal expenses3909736 3909736 3909736 3909736 3909736 3909736 3909736 3909736uepreclaLlon Lxpenses47320 47320 47320 47320 47320 47320 47320 47320-ew Mach|ne r 1 r 2 r 3 r 4 r S rr 7 r Salarles Lxpenses381696 381696 381696 381696 381696 381696 381696 381696MalnLenance Lxpenses 39300 39300 39300 39300 39300 39300 39300 39300LlecLrlclLy Lxpenses 26830 26830 26830 26830 26830 26830 26830 26830AddlLlonal Savlngs3200 3200 3200 3200 3200 3200 3200 32001oLal Lxpenses1193196 1193196 1193196 1193196 1193196 1193196 1193196 1193196uepreclaLlon Lxpenses126230 126230 126230 126230 126230 126230 126230 126230ASn ILCW ICk -9I CM9AkISC-SLxpenses for CurrenL 390974 390974 390974 390974 390974 390974 390974 390974nv for CurrenL Machlne($203669600)Lxpenses for new119320 119320 119320 119320 119320 119320 119320 119320nv for new Machlne ($101000000)($163137074)lnCLMLn1AL AnAL?SlS?r 1 ?r 2 ?r 3 ?r 4 ?r 3 ?r 6 ?r 7 ?r 8lncremenLal evenue271634 271634 271634 271634 271634 271634 271634 271634ulff uepreclaLlon Lxpense 38730 38730 38730 38730 38730 38730 38730 38730Larnlngs before lnLeresL and Laxes 212924 212924 212924 212924 212924 212924 212924 2129241ax (43) 9133732 9133732 9133732 9133732 9133732 9133732 9133732 9133732neL CperaLlng roflL AfLer 1ax 1213667 1213667 1213667 1213667 1213667 1213667 1213667 1213667+ ulff uepreclaLlon Lxpense 38730 38730 38730 38730 38730 38730 38730 38730neL Cash lnflow (CuLflow) 1800967 1800967 1800967 1800967 1800967 1800967 1800967 1800967ntrementaI ash tItw IrtetttnASn ILCW A-ALSISr 0r 1 r 2 r 3 r 4 r S rr 7 r Selllng of seml auLomaLed machlne130000urchase of new machlne 830000Wlrlng and ower Supply for new machlne 133000Shlpplng lnsLallaLlon 1esLlng of new machlne 3000neL Cash lnflow (CuLflow) from CperaLlon1800967 1800967 1800967 1800967 1800967 1800967 1800967 18009671oLal neL Cash lnflow (CuLflow) 880000 1800967 1800967 1800967 1800967 1800967 1800967 1800967 1800967AccumulaLed neL Cash lnflow (CuLflow) 880000 699903 319807 339710 139613 204834 2003801 3806768 3607734!'102.976IRRIRR (totaI net cash infIow) = 13.84% !ayback !eriodYear 5thntrementaI ash tItw Irtetttn at 1' nIIattnI-kLML-@AL A-ALSIS r 0 r 1 r 2 r 3 r 4 r S rr 7 r lnflaLlon lacLor 1 103 10609 1092727 1123309 1139274 1194032 1229874 126677lncremenLal evenue* 2798036 2881977 2968437 303749 3149214 3243691 3341002 3441232ulff uepreclaLlon Lxpense 38730 38730 38730 38730 38730 38730 38730 38730Larnlngs before lnLeresL and Laxes 2210736 2294677 2381137 247019 2361914 2636391 2733702 28339321ax (43) 9306166 9867112 1023889 1062182 1101623 1142248 1184092 1227191neL CperaLlng roflL AfLer 1ax 126012 1307966 1337248 1408008 1460291 1314143 136961 1626741+ ulff uepreclaLlon Lxpense 38730 38730 38730 38730 38730 38730 38730 38730neL Cash lnflow (CuLflow) 184742 1893266 1944348 1993308 2047391 2101443 213691 2214041ASn ILCW A-ALSISr 0r 1 r 2 r 3 r 4 r S rr 7 r Selllng of seml auLomaLed machlne130000urchase of new machlne 830000Wlrlng and ower Supply for new machlne 133000Shlpplng lnsLallaLlon 1esLlng of new machlne 3000neL Cash lnflow (CuLflow) from CperaLlon184742 1893266 1944348 1993308 2047391 2101443 213691 22140411oLal neL Cash lnflow (CuLflow) 880000 184742 1893266 1944348 1993308 2047391 2101443 213691 2214041AccumulaLed neL Cash lnflow (CuLflow) 880000 693238 303731 311277 111746 9301329 3031376 3188486 7402327!'205.546IRR16.67%!ayback !eriodYear 5th1 CosL of each machlne 2 nv of each machlne3 8eneflL over Llme for each machlne1to 1 CuaItatve tnsderattn8uy vulcanMold or noL??es because new machlne ls 1 Less cosL Lhan old one2 8lgger nv3 educe labor cosL4 CapaclLy lncreased 303 1o avold layoff of 24 operaLors londerla have opLlon Lo sell old machlne along wlLh Lhe operaLorstnaI Lettmmendattn