Fonderia di Torino SPA

Questions:
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?
2. What uncertainties or qualitative considerations might influence your
recommendation? How, if at all, would an inflation rate of 3% (or higher) affect
the attractiveness of the Vulcan Mold-Maker? Please estimate the impact on NPV
from a change in any of those elements.
3. Should Francesca Cerini proceed with the project?

Please assume that the semiautomated equipment could be operated for two more
years beyond the end of its depreciatable life thanks to ordinary maintenance. Thus
the lives of both the semiautomated and Vulcan Mold-Maker alternatives will be eight
years.

Reports in pdf files should be sent to btfazendeiro@fe.unl.pt by Sunday April 26, 2009.

Each report should not exceed 8 pages.

The cover page of the written report should include the following:

Name of the case, name of the teacher, name of the class, names and numbers of all group
members

All groups should be prepared for in-class presentation and discussion.