...CEAG – Disciplina: Avaliação de Empresas (Valuation) - Profº João Carlos Douat Alunos: Carlos Lima Campos, Mariana Yukie Miyazaki e Sergio Varella Petti Estudo de Caso: Fonderia Di Torino S.P.A. 1. Cenário A empresa Fonderia di Torino, fabricante de peças de fundição, quer investir em uma máquina automática de modelagem, chamada Vulcan Mold-Maker, para substituir a máquina semi-automática. A máquina antiga exige mais mão-de-obra e é mais prejudicial à saúde dos trabalhadores enquanto que a nova máquina é mais produtiva e eficiente. No entanto, o maior impedimento para a compra da nova máquina é o acordo entre a companhia e a união dos trabalhadores pois com a aquisição, 24 operadores seriam demitidos. A empresa agora precisa decidir se investe ou não na nova máquina. 2. Avaliação da viabilidade do projeto utilizando técnicas de análise de investimentos Para analisar a viabilidade da aquisição da nova máquina foram adotadas algumas técnicas de análise de investimentos: * Payback simples e descontado A partir da estimativa do incremento do fluxo de caixa, podemos calcular o payback simples e descontado do projeto. É o tempo de retorno do investimento inicial até o momento no qual o ganho acumulado se iguala ao valor deste investimento. Para o cálculo do payback simples, o fluxo de caixa não é descontado: Payback simples 0% inflation=4+ 148.717166.145=4,90 Payback simples 3% inflation=4+ 124.425182.749=4,68 Para o cálculo do payback descontado...
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...Fonderia DI Torino S.P.A. Teaching Note Synopsis and Objectives The managing director of this specialty foundry must decide whether to approve a major investment to automate part of her plant’s production process. The case presents information sufficient to build cash-flow forecasts of production costs incremental to this investment. Discounted cash flow (DCF) analysis reveals that this investment project is attractive but that the benefits hinge on important assumptions about the plant’s business volume, the manager’s ability to lay off workers over the objections of a labor union, and the hurdle rate. The case may be used for the following: • Introduce students to mechanics of DCF analysis of go/no-go capital-investment decisions. • Consider the principle of incremental analysis as the foundation for identifying relevant cash flows for a project. • Explore the classic tradeoffs in capital-for-labor investment. • Review the analytical adjustments that are required to compare projects of unequal lives. Suggested Questions for Advance Assignment to Students 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...
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...Fonderia di Torino Case Introduction Fonderia di Torino was founded in 1912 by Benito Cerini. The company was created to produce castings for the armaments industry. In the 1920’s and 1930’s the company expanded into the automotive industry. Benito Cerini foresaw the future demand for precision metal casting and revamped the company to meet the demand. The company grew slowly but steadily. Fonderia di Torino’s specialization is the production of precision metal castings for the use in automotive, aerospace, and construction equipment. The company stood out because of its quality products. It was awarded for its quality parts. Its products included safety parts like crankshafts, transmissions, brake calipers, axles, wheels and various steering-assembly parts. The mainly European customers of Fonderia di Torino were original-equipment manufacturers (OEM). The OEMs insisted on quality products. The OEMs gave preferential treatment to Fonderia di Torino. The confidential market-demand information that Fonderia di Torino received helped increase the precision of production scheduling and the company received relatively long-term supply contracts from the OEMs. Francesca Cerini, the great-granddaughter of Benito Cerini, is the managing director of Fonderia di Torino. In November of 2000 she was faced with the decision of purchasing an automated molding machine called the Vulcan Mold-Maker. The machine would produce the sand molds into which molten iron was poured to...
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...Memorandum: To: Maurry Tamarkin Oct. 2, 2002 Subject: Fonderia di Torino S.p.A. Analysis of the Vulcan Mold-Making machine has been valued as was requested by Fonderia di Tortina. In order to assess the economic benefits, we started by comparing the cash flows, specifically the outflows after taxes for both mold-making systems see (exhibit 1-1). We assumed that two machines produce the same quantities of products, despite the fact that they have different capacities. Relying on this assumption, we found the present values of costs associated with each machine using the discount rate 9.9% of Weighted Average Cost of Capital. Then in order to be able to compare each project on an annual basis, we determined the equivalent annual costs by using the annuity factor related with each machine and examined the outcomes to see which machine would be least expensive to acquire and operate. We can conclude from this analysis that the Vulcan Mold-Maker has lower annuity payments than the six current machines and therefore we might conclude that NPV analysis might warrant the investment into the new machine assuming that other related factors would be in favor of the new investment. However, when assessing the economic benefits there were many qualitative factors that needed to be considered. For example: • Cerini was unsure whether the tough collective bargaining agreement her company had with the employees’ union would allow her to lay...
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...Previous notes about case This report is about the Vesuvio Fonderia Company which was founded by the Lombardi family in 1912 and which is specialized in the production of precision metal castings for the aeronautics, automobile, and construction industry. This company was a very important one in Italy which can be verified by the fact that it had been listed on the Milan Stock Exchange Market (1991). The main questions for the company to face are related to: ▪ Working with semi-automatic machines which have 6 years of usage. The new ones are highly automated and promise a higher expected life (8 years); ▪ In terms of work quality the old machines are less productive combined with a lack of consistency. In contrast, the new machines ensure higher productivity and better quality; ▪ Finally, the old machines are also very labor intense which led many workers to present medical claims. Another advantage of the new machines is that they are more space-saving than the semi-automatic ones. On the other hand they have to incur in more costs. (are more expensive) Will this investment be advantageous? Will this investment be worth the money spent? We are going to answer those questions and to present a suitable recommendation in consideration of every important aspect. 1- The case does not give details about pricing, sales or revenue. Is this a problem? The case does not give details about pricing, sales or revenue but that is not really...
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...Outline • • • • • • • • • • Fonderia di Torino Overview Problem Definition Financial Considerations Determination of Discount Rate Estimation of Cash Flows NPV Equivalent Annual Cost Qualitative Considerations Sensitivity Analysis Conclusions and Recommendations 10 March 2015 2 Overview of Fonderia di Torino ● Founded in 1912 by Benito Cerini, located in Milano ● Specialized in the production of precision metal castings (automotive, aerospace and construction equipment) ● Its well-known safety pieces made them conclude contracts with Peugeot, BWM, Ferrari Problem Definition ● Original equipment manufactures(OEMS) shared confidential market demand information, ● Provided cheap loans to support capital expansion ● Benito Cerini predicted a postwar demand, enabled to meet that demand ● From 1940’s to 2000’s, the pace of growth was stable ● In 1991, on the Milan stock exchange (55% of the shared in Cerini family’s hands) 10 March 2015 3 Problem Definition: Should we replace old equipment or not? Old Machines Vulcan Mold-Maker ● Semi-automated machines; ● Automated molding machine; ● Workers stamped impressions under heat and high pressure; ● Prepares sand molds to obtain iron castings; ● Labor intensive process → training/retraining to obtain consistency in mold quality; ● Replace old machines; ● Heavy lifting from workers → medical claims for back injuries doubled in the last 10 yrs due to production...
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...operating, maintenance and power cost, plus the benefits of a tax shield and increased labor efficiency, incremental cash outflows in years 1-8 will be 177,948 Euros for both machines. At a 9.855% discount rate, the net present value of buying the Vulcan Mold-Maker is negative 1,184,953.11 euros, but results in a positive incremental NPV of 907,198 in comparison of the two machines (Table 1). Based on the cost comparison between the two machines, the VMM machine will generate less annual recurring cost compared to the old molding machine (Table 1). The improvement in the labor efficiency is the major contributor to the cost difference of the two molding machines (Tables 4-5). The 0% employee retention rate favors NPV the best, but even if Fonderia retains 100% retention at a lower wage rate, the company will still have a positive NPV (Table 5). After estimating the incremental after-tax cash flows from investing in the project, NPV was then taken into consideration. The substantially higher NPV reflects the presence of net working capital during periods of inflation. If an inflation rate of 3% were applied to the operating costs for the eight-year life of the new machine, the purchase begins to look even more favorable as NPV of the cash flows (Tables 2-3). In this case the inflation causes an addition to the net working capital each year, and the additions are positive incremental cash outflows from a result of...
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...UNIVERSITY OF WASHINGTON Graduate School of Business Administration Finance 553 CAPITAL INVESTMENT PLANNING Winter 2003 Professor Robert C. (Rocky) Higgins 306 Mackenzie Hall Tel: 543-4379 E-mail: rhiggins@u.washington.edu Homepage: http://us.badm.washington.edu/higgins/ (From here you’re one click from the class page) Office Hours: M, W: 10:30 – 12:00 COURSE OBJECTIVE Capital Investment Planning is a case course examining corporate investment decisions and related issues in financial strategy. The course is intended as a continuation of Finance 552, Corporate Planning and Financing, and is suitable for generalists and finance specialists who seek a solid grounding in corporate financial management. Finance 555 may be substituted for Finance 552 as a prerequisite. Principal topics include: use of discounted cash flow analysis to evaluate investment opportunities, estimating capital costs, or discount rates, capital budgeting systems and their affect on resource allocation decisions, valuing a company or division, merger analysis, corporate restructuring including leveraged buyouts, and issues in financial strategy. When you complete this course, you should be able to: Estimate an investment’s relevant costs and benefits Estimate a company's weighted-average cost of capital and understand its role in investment decision making Use discounted cash flow techniques, decision trees, and simulation to analyze investment opportunities Value (i...
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