Adamac Inc

1099 WordsFeb 11, 20115 Pages
ADAMAC INC. Academic Honesty Verification I verify this document was prepared in accordance with my signed Academic Honesty Statement. This document was prepared by me specifically for ENTR 3140 and no other course. The thoughts, ideas and writing in this report reflect my work and my work only unless I have properly attributed credit to other sources. ____________________________________ ___________________ Signature Date Critical Issues * Adamac Inc. has grown significantly to a point where the organization is unable to meet current demand and is struggling to maintain their position as a quality producer in the unstable manufacturing industry. * Adamac Inc. has the opportunity to purchase new equipment that will…show more content…
A down payment of $70,000 would be required, and a first year interest payment of $45,370 (Exhibit 9). It is expected that the two machines would run at 40% capacity bringing in incremental revenue of $613,225, and incremental operating income of $234,855. The cost breakdown structure and the incremental gains for the laser cutter and water cutter can be seen in Exhibit 10. The ROI at 40% capacity is 33.80% (Exhibit 5), which is well above the banks lending rate. The payback period at 40% capacity is the lowest of all options at 3 years (Exhibit 6). With a score of 30, this option scored the highest against the decision criteria (Exhibit 7). This is largely due strongest cash flow, highest ROI, and emphasis on maintaining a high quality product and excellent costumer service. Recommendations Adamac should go ahead with the expansion plan to purchase a new laser cutter and water jet. The two machines should be purchased as soon as possible. Together the two machines offer the best incremental revenues, and have the shortest payback period, and highest ROI. The Down payment of $70,000 will be taken from net earning last year, and a Loan for $630,000 amortized over 4 years will be required. Adamac will no longer rely on outsourcing to competition allowing them focus on what they do well, providing a quality product with superior customer service. Exhibit 1 – SWOT Analysis Strengths * Customer service * Quality producer * Diverse group of clients *

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