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Vesuvio

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Submitted By inesa380
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This report is about the Vesuvio Fonderia Company which was founded by the Lombardi family in 1912 and which is specialized in the production of precision metal castings for the aeronautics, automobile, and construction industry. This company was a very important one in Italy which can be verified by the fact that it had been listed on the Milan Stock Exchange Market (1991). The main questions for the company to face are related to: ▪ Working with semi-automatic machines which have 6 years of usage. The new ones are highly automated and promise a higher expected life (8 years); ▪ In terms of work quality the old machines are less productive combined with a lack of consistency. In contrast, the new machines ensure higher productivity and better quality; ▪ Finally, the old machines are also very labor intense which led many workers to present medical claims. Another advantage of the new machines is that they are more space-saving than the semi-automatic ones. On the other hand they have to incur in more costs. (are more expensive) Will this investment be advantageous? Will this investment be worth the money spent? We are going to answer those questions and to present a suitable recommendation in consideration of every important aspect.

1- The case does not give details about pricing, sales or revenue. Is this a problem?

The case does not give details about pricing, sales or revenue but that is not really a problem because it is not a matter of increasing sales but of producing more efficiently. Since the sales and revenues are the same for each project, it doesn't represent incremental cash flow to any of those projects. In fact, we need to consider the cash flows generated by each project when we're deciding which one is preferable.

In our case, we have to choose between buying a

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