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Polymold Division

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In determining whether Polymold should invest in the CAD/CAM computer, forecasts should be made including the purchase and with out the purchase. Comparisons in the forecast should focus on the net present value, return on investment, earnings per share, and internal rate return of the purchase of the CAD/CAM to the forecasts of the company without the purchase of the computer. Once the forecasts have been made, the main variables of differentiation in the income statement will focus around the sales, inventory, cost of goods sold, and depreciation. The most promising aspect of technology investment is the increase in sales brought on by the efficient and effective method of production. The costs of goods sold would decline, as the efficiency of the production would increase with the system. Depreciation would also increase, as the CAD/CAM would be depreciated over some time. Due to the heavy cost and useful lifespan of the system, the system should depreciated in order to make the most of the tax benefits created by the acquisition. The firm may use straight line or MACRS.
The main differentiation in the balance sheet will be accounts receivable, inventory, and total assets. Accounts receivable will increase as a result of the volume of sales increase. The production and sales increase will consist of purchases on credit, which will inflate the accounts receivables. The increase in sales and production will inflate inventory as the market creation will expand and meet economies of scale. Along with the acquisition of the CAD/CAM system which will also expand the firms market share and production, the division will make other acquisitions related to the expansion and the total assets account will increase as a result.
The information provided in the forecasts that would be of most importance would be the comparative information in the income statements and

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