Case Study 2 Fonderia Di Torino S.P.a

FONDERIA DI TORINO S.P.A

FONDERIA DI TORINO S.P.A

Executive Summary

Fonderia di Torino specialized in the production of precision metal castings for use in automotive, aerospace, and construction equipment. Located in Milan, Italy, had been founded in 1912 by Francesca Cerini's great-grandfather, Benito Cerini, a naval engineer, to produce castings for the armaments industry.

In November 2000, Francesca Cerini, managing director of Fonderia di Torino S.p.A.,' was considering the purchase of a Vulcan Mold-Maker automated molding machine. This machine would prepare the sand molds into which molten iron was poured to obtain iron castings. The Vulcan Mold-Maker would replace an older machine and would offer improvements in quality and some additional capacity for expansion

From evaluation of natures of the problem, cash flows (indicated by positive increment) associated with the Vulvan Mold Maker and the semi-automated machines, NPV is positive, and IRR higher than WACC, it is therefore recommended by Group 4 that Fonderia di Torino S.p.A to purchase of a Vulcan Mold-Maker automated molding machine to replace the old machines. Replacing with new machines will give improvements in quality, additional capacity for expansion and generate more cash flow for the company.

Fonderia di Torino CompanyOverview

* Fonderia di Torino specialized in the production of precision metal castings for use in automotive, aerospace, and construction equipment, located in Milan, Italy, had been founded in 1912 by Francesca Cerini's great-grandfather, Benito Cerini, a naval engineer, to produce castings for the armaments industry.

* In the 1920s and 1930s, the company expanded its customer base into the automotive industry.

* Its sales for calendar-year 2000 were expected to be €280 million.

* It was listed for trading on the Milan stock exchange in 1991, but the Cerini family owned 55% of the common shares of stock outstanding. {The company's beta was 1.25.3...