Business Case Studies & Business Publications

Vesuvio Fonderia S.P.A.

Bruner, Robert F.

Case

Vesuvio Fonderia S.P.A.

Bruner, Robert F.

F-1026 | Published February 17, 1993 | 3 pages Case

Collection: Darden School of Business

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The managing director of this specialty foundry must decide whether to approve a major investment to automate part of her plant's production process. The case presents information sufficient to build cash flow forecasts of production costs incremental to this investment. Discounted cash flow (DCF) analysis reveals that this investment project is attractive but that the benefits hinge on important assumptions about plant volume of business and the manager's ability to lay off workers over the objections of the union. The case may be used as a simple introduction to DCF analysis of investment projects by focusing on the analytical mechanics. The case can also be used to introduce students to the classic trade-offs in the capital-for-labor investment decision.