The Case Study

Making Ford Firm Investment Decision

Ford is a large cars makers firm considering replacing one of its painting machine with either of two new machines, machine A or machine B. Machine A is highly automated, computer-controlled machine; machine B is a less expensive machine that uses standard technology. To analyse these alternatives, Simon Ray, a financial analyst, prepared estimates of the initial investment and incremental (relevant) after-tax net cash flows associated with each machine. These are showing in the following table: