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FINANCIAL DECISION MAKING and RISK ANALYSIS.
M21 EKM.

RE-SUBMIT  ASSIGNMENT- JULY 2009.

代写留学生毕业论文 Your company, a medium size manufacturing company, manufactures a range of engine management systems for sale as original equipment to the automotive manufacturing market. This market is expected to grow at 10% per year for the next 5 years. The current production line is just about at capacity, although you are currently working a two shift system to maintain current production levels. An alternative to recruiting additional labour is to invest in CNC machines, which will increase the capacity of your production to absorb the expected growth in demand for at least the next five years on a single shift basis.

The purchase of 3 new CNC machines will form the basis of a flexible manufacturing  cell. The CNC machines will cost £250,000 each, and are expected to last for 5 years, after which they will be sold off for £25,000 each. The additional dedicated tooling for your current production range will cost a further £80,000 in total and a further £25,000 will be required for material handling equipment, etc. The maintenance of the tooling and associated equipment will be done ‘in-house’ at an estimated cost of £5,000 per year, but because your maintenance department does not have the experience/expertise to maintain the CNC machines, a contract will be taken out at a cost of £10,000 per year. It is further estimated that a saving of £5,000 per year in reduced scrap/rework should be realised, and the existing 8 old capstan lathes can be sold off for £2,500 each.

The new cell will be operated by 3 programmer/operators  recruited out of the existing workforce of 16 machinists, who are currently paid £20,000 each inclusive of shift premium etc. Following training, at a cost of £10,000, (to be paid within the first 3 months), they will be paid a salary of £22,000 per year each. The remaining 13 machinists can be considered as a saving, together with a maintenance fitter who currently earns £18,000 per year.

As the Financial Director of your company, you are required to submit a detailed report to your fellow ‘Board Members’, evaluating the proposed investment, fully justifying any recommendation you will make and 代写留学生毕业论文 identifying any potential problem areas and offering potential solutions. (NOTE;- your current cost of capital is 10%).