Metalcrafters

Case 1: Metalcrafters, Inc.

After reviewing the current opportunities and manufacturing constraints I have identified two possible options for meeting new demands in our Stamping Press department. Along with the growing need of increased production through the Extrusion Press department there are 3 viable prospects to take into consideration. Currently, with the limited capacity to meet new demands by returning clients, we are only able to accept one new parts order due to the newly incurred costs.

To meet the growing needs by customers the small and large extrusion press investment value will have to be determined in terms of toady. Also, the value of doing nothing and keeping old equipment will have to be taken into consideration. As with the stamping press, the possible values to take into consideration when making a decision are net present value and payback period. Equivalent annual cost can be calculated, but these new presses yearly expenses are already outlined as a percentage of annual sales and will not occur if there are no sales. The net present values will need to be obtained using the initial investment amounts and discounted cash flows over the life expectancy of each option using company required rate of return. Payback period will have to take sales against costs to show when each option will be paid off and start generating a positive return for the remaining amount of life expectancy. These calculated values compared to each other will show which one of three will be the best option is moving forward.