Polymold Division Strategy Paper

657 Words Apr 3rd, 2014 3 Pages
Polymold Division The Polymold Division case is answering whether or not the CAD/CAM is a good investment. We are looking to answer how it benefits the company, financially. Mr. Martin, the Polymold Division manager felt that sales would continue to decline if Polymold did not invest in the new computer-aided designing and manufacturing system and it would lose market share on its remaining products to its more technologically advanced computers. Mr. Martin feared the marketplace. Polymold manufactured high-quality precision molds with interchangeable parts. When forecasting Polymold Division’s financial statements there are some assumptions that need to be taken into account before projecting the numbers. One of the assumptions is …show more content…
Any additional data that was given would also be taken into consideration. For years 1983-1985, additional corporate assessment expense was given. This would lower Polymold’s earnings on their income statement. Another piece of data that was given is research and development expense. Without the CAD/CAM investment, research and development expense is $130,000. This is double to $260,000 without the CAD/CAM investment. This would lower earnings. We are also given the savings that the investment would yield. Without the CAD/CAM investment, there would still be savings – but not as much as with the CAD/CAM investment, which is due to the depreciation of the equipment and tax credits. Another factor should be how the underlying assumptions of Polymold division play a role in the company’s investment decision. We should select the decision that yields the highest return on assets when producing the forecasted financial statements. We can prepare a balance sheet for the forecasted years and look at how much it differs with and without the CAD/CAM investment. We should also calculate quick ratio, debt/equity ratio, asset turnover ratio, etc. Then, we select which investment gives us the better return on investment. We must also consider the rate of inflation. There are forecasted values of sales with and without the rate of inflation, so we would need to prepare financial statements with and

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