caseism

Aurora Textile Company Case Solution & Answer

This case requires the student to decide if Aurora Textile Company can create value by improving your spinning machine for producing high quality yarns selling higher margin. cost information allows the student to produce cash flow projections for the existing spinning machine and the new machine. Cash flows have many elements of different costs, including depreciation are the number of days of inventory cotton and liability costs of retail performance. The capital cost is specified in order to simplify the analysis. The analysis adds to the complexity, however, due to the financial situation in crisis, both in the U.S. textile industry, which is in decline as manufacturers migrate to Asia to take advantage of low production costs and low business. This raises the question whether the administration should invest in a company in decline or to grow the company paying all profits as dividends to the owners. The case is suitable for students who are beginning to learn the principles of finance, but also rich enough to use with students and experienced managers. The main teaching points are: The foundations of analysis of incremental cash flow: determination of relevant cash flows into a capital investment decision? The analysis of the construction side to side by a discounted cash flow replacement decision? How to adapt the NPV decision rule to an industry in crisis or die? The effect of the financial problems in the calculation of NPV? The importance of sensitivity analysis for capital investment decision
by
Kenneth Eades,
Lucas Pérez
Source: Darden School of Business
14 pages.
Release: September 11, 2007. Prod #: UV0741-PDF-ENG
Aurora Textile Company Case Solution

Share This

LOOK FOR A FREE CASE STUDY SOLUTION

JUST REGISTER NOW AND GET 50% OFF ON EACH CASE STUDY