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Aurora Textile Case Study Essay

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e DATE: 2/23/13 TO: Mr. Ansley Chua FROM: Austin Johnson, Enxing Liu, Tyson Hilyard, and Tanner Strathman SUBJ: Aurora Textile Company EXECUTIVE SUMMARY Aurora Textiles has historically been one of the premier textile companies in the United States and now has a decision to make. With the opportunity to invest in equipment that could help cure our slumping financials, we must carefully explore whether this investment is appropriate for a company with such an uncertain future. With that in mind we believe that the Zinser 351 is the perfect investment to pull us out of this slump. As a company that has been able to deliver a premium product for the consumers, the Zinser 351 will allow us to continue to do that while also begin…show more content…
The first of these concerns would be the financial situation of Aurora Textiles as a whole. We have historically been a very strong company who has been seen as one of the premier companies in the textile industry. As of late we have posted less than stellar numbers though. In each of the last four years, we have posted negative net earnings. This is troubling and if this continues it could lead to us having to liquidate the company. With the current cash burn rate that we are on, our company will be bankrupt in 7.86 years. When evaluating the Zinser project we will look at this as the tentative cutoff date for when we can realize the cash flows for this project. Although we have been struggling financially and have an approaching timeline for turning the company around, we find that this only gives us more of an urgency to invest in the Zinser. First of all, when looking at the discounted payback period for the project, we have discounted back the cash flows for the project and found that the current payback period is 4.07 years. This is encouraging as it is well before the 7.86 year deadline we are on. Having a relatively small payback period is important to us because of the struggles we have had lately. Since this project fits our time horizon, we can look at what this project will do for our
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