Metalcrafters INC.

Metalcrafters Inc produces specialized polished and anodized aluminum hardware and molding parts for the auto industry. Metalcrafters, Inc. has long had a reputation for being on the conservative side when it came to taking on investments. It is now tasked with analyzing the financial payoffs of four potential investments along with two contracts of the budget committee. Metalcrafters task is to subject the investments and ultimately decide which of the investments are worth the companies time and money.
Two of the proposed four investments were in new equipment. The first of these two was the purchase of a new stamping press. Metalcrafters had been experiencing a high amount of costs associated with the repairs to the old machine, and management felt that it was time to invest in a new one. There were two stamping presses being considered. The first was the SX-65. The SX-65 would cost $60,000 initially, but would save the company $28,000 a year over its five year life. After five years, the SX-65 could be sold for $5,000. The other stamping press being considered, the MD-40, varies slightly in its variables. The MD-40 would cost the firm $90,000 initially, but would last ten years, which at that time would hold salvage value of $5,000.
To start, I would calculate the criteria of the NPV, IRR, Profitability index and the payback period. metalcrafters Inc. would have more of an advantage at deciding which investment to recommend to the budget committee. I say this because with NPV they can look at the present value of all future cash flows. IRR, profitability index, and discounted payback criterions usually favor investments with shorter periods of duration. Since SX-65 has a useful life of 5 years and the MD-40 has a life of 10 years, the company could expand the SX-65 from 5 years to 10 years so that the two alternatives can be