Premium Essay

Aurora Textile

In: Business and Management

Submitted By kingofstove
Words 405
Pages 2
Aurora Textile is a problem where they only have two option, which is to buy the Zinser 351 or to use the older generation machine from past decade. The problem is much more severe when faced with the fact that Aurora have been on loss for four years now, coupled with more and more textile industry moving their operation to overseas. 1. If Aurora Decided to stick with their old machinery
If Aurora decided to stick to their old machinery, First off they current book value of the machine is $ 800,000 (from data given). Taken into account the sales growth (2%) and volume (1%) next year, combined with the current selling price of $ 1.0235 per pound means annually the old machine will produce $ 511,750 (not taking account returned goods), while for the next four years consequently it will produce $ 516, 867.5, $ 522,036.175, and $ 527, 256.537. The current book value of machine of $800,000, coupled with $200,000 for the remaining of four years of usage (then it will be free of depreciation), means taking NPV of Hunter Plant is estimated to be $ 8.9 million.

2. If Aurora Decided to Invest in Zinser 351 Machine
If Aurora decided to invest in new machine, at first they will need an initial investment of $8.25 million (from total capitalized cost), plus, Aurora have spent $ 5,000 on engineering test, $ 15,000 market research, and additional $50,000 for one time employee training. The effect on investing on Zinser, is that they will be reduction in conversion cost of Hunter plant, from $0.43/pound, to $0.40/pound, also the potential of reduced cotton inventories from 30 days to 20 days. At the same time, the price of the yarn will increase 10% from $ 1.0235 to $ 1.126, while other value doesn’t change from first choice (total annual production growth in sales and production). In all, the NPV of the Hunter Plant is about $ 14.42 million.

Comparation Between Investing…...

Similar Documents

Premium Essay

Aurora Textile

...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 relieving some of the financial stress that we have been under.   Our analysis shows that the Zinser 351 project will yield a Net Present Value of $6,474,082.14 million and a discounted payback period of 5.6 years.   This project not only brings a big enough payoff as demonstrated by the NPV, but also fits our timeline.   The discounted payback period indicates that our investment will be realized before our company is not able to recover from our current financial struggles.   The Zinser 351 is a project that this company must undertake if it wants to begin to bring value back to the shareholders who have become more and more impatient with us in recent times.   This is an opportunity for Aurora to turn around its fortunes and once again prove that it is the premier textile company in the United States. ANALYSIS When deciding whether the Zinser is a worthwhile investment or...

Words: 596 - Pages: 3

Free Essay

Aurora Textile Company

...MANAGERIAL DATA ANALYSIS – CASE STUDY SUBJECT ANALYSED: THE RELATIONSHIP BETWEEN GROSS DOMESTIC PRODUCT AND HUMAN DEVELOPMENT INDEX in 41 COUNTRIES MIHAILA MIOARA 25% PETRE ALEXANDRA 25% SIMION LAURENTIU 25% TARIUC MONICA 25% MANAGEMENT of INTERNATIONAL PROJECTS ASE 2009 Case Study Record 40 – 60 data for two statistical variables (X and Y) at your choice. I. For each of the two variables: a) Calculate and interpret the average, standard deviation and the coefficient of variation for row data. Interpret the results. Is the data series homogenous? b) Summarize the data in an appropriate number of classes. Construct the frequency distribution. c) Calculate and interpret for the frequency distribution the average, standard deviation and coefficient of variance. Compare with the results from point a). Explain the differences. d) Construct a histogram and describe the shape of the distribution based on the histogram. e) In which interval is expected that about 95% of the data will fall? Is this assumption true for this data? II. Using the “Pivot Table Wizard” in EXCEL, build a pivot table on your spreadsheet (using also the second variable). You may have to change the order of the rows (You should define the intervals first using VLookup......

Words: 1590 - Pages: 7

Free Essay

Aurora Case

...Q.1 The Textile-Mill Industry is a term associated with industries that are primarily concerned with the design and manufacturing of clothing as well as the distribution and use of textiles. The industry can be split up into three stages: Cotton stage, industrial revolution, and post industrial revolution. In the early parts of the Textile-Mill Industry, known as the cotton stage, products were produced at home using wool, cotton, or flax depending on the area and location. The excess material was sold to merchants called clothiers who would visit the villages and buy large amounts of excess cloth from local producers. The process for making cloth involved three steps which included preparation of fibers for spinning, spinning, and weaving or knitting. In the early days everything was very labor intensive and the market was limited to local towns and passing clothiers. The second stage of the Textile-Mill Industry is known as the industrial revolution stage. During this period mass production of clothing became a mainstream industry which resulted in a growth of the entire Textile-Mill Industry. The spinning and weaving process became mechanized with several new machines introduced to the industry with the majority of the power coming from water wheels. Additionally, the industries market began to expand as exports of textiles began to rise. Presently the Textile-Mill Industry is situated at the third stage known as the post industrial revolution stage. In...

Words: 1442 - Pages: 6

Free Essay

Aurora Borealis

...colors. The northern horizon is draped with an iridescent green, deep blues, sharp violets, scarlet reds, and bright oranges and yellows. You stand awestruck as the colors descend, like a melting rainbow, across the sky. Then, as quickly as they appeared, they vanish without a trace. This natural phenomenon is known as aurora borealis, or the northern lights, or better known as the dancing lights. Aurora Borealis is one of the most exotic and difficult concepts in astronomy. The colours of aurora borealis are fomed by the collision of gas particles in the Earth’s atmosphere with charged electrons from the sun’s atmosphere. So, today I will inform you about the different types of gas particles that are involved in the production of the colours of aurora borealis. I obtained the all the information about Aurora Borealis from the book entitled The Amazing Northern Lights authored by Syun-Ichi Akasofu. First of all, the big player in the formation of lights of the aurora borealis is oxygen. Oxygen is responsible for the vivid green light and also for a deep brownish red light. The emission of the deep brownish red light occurs at high altitudes of the aurora. At high altitudes, the earth’s atmosphere contains a greater percentage of atomic oxygen and is very thin like a hard vacuum giving the atoms ample opportunity to emit red light since the collisions between atoms happen only about every 7 seconds. This atomic oxygen emits red light at a wavelength of 630.0 nm.......

Words: 571 - Pages: 3

Free Essay

Textile

...a $19 billion dollar a year industry[5] following the expiry in 2005 of an international agreement on textiles and clothing import quotas in place since the early 1960’s[6], duty-free access offered by western countries, and low labour costs. The Bangladeshi textile and garment manufacturing sector is fuelled by young, urbanizing, workers many of whom are women. With the majority of production destined for U.S. and European markets, Bangladesh’s ready-made garment industry now accounts for approximately 78% of total exports[7], second only to China as the world’s largest apparel exporter.
 
However, Bangladesh has a long history of health and safety tragedies in garment and textile manufacturing. Garment factory fires and collapses have killed at least 1800 workers since 2005[8]. The Tazreen Fashions fire on 24th November 2012 and the unprecedented disaster of the collapse of the Rana Plaza factory complex on 24 April 2013, together resulting in the tragic death of over 1,200 garment workers are examples of the most recent and highly publicised disasters. The Accord on Fire and Building Safety in Bangladesh is designed to make all garment factories safe workplaces and is specifically developed to deal with the unique challenges facing the ready-made garment and textile industry in Bangladesh. http://en.wikipedia.org/wiki/Bangladesh_textile_industry Exports of textiles and garments are the principal source of foreign exchange earnings By 2013, about 4 million people,......

Words: 1282 - Pages: 6

Premium Essay

Aurora Textile Company Case

...Aurora Textile Company Case Abstract In January 2003, Michael Pogonowski, the chief financial officer of Aurora Textile Company, was questioning whether the company should install a new ring-spinning machine, the Zinser 351, in the Hunter production facility. This new machine has ability to produce a finer-quality yarn that would be used for higher-quality and higher-margin products. In deciding whether or not to invest this new machine, NPV and the payback period are critical factors. Firstly, we need to forecast the cash flows that the Zinser 351 will generate in the future. After calculation, the ten-year NPV will be $3, 172,582. Secondly, we use the payback period to analyze the acceptance of this project. Based on this analysis, Aurora Textile Company should invest this new machine because of the positive NPV and relatively small payback period, which we will analyze in the following discussion. Analysis In this analysis, we determined that NPV is the critical factor determining whether the company should invest or reject that new project. Secondly, we established that the payback period is another contributing force in our decision. The payback period tells us whether we can earn some money in the set period of time but this model has a few drawbacks, such as ignoring timing of cash flows and the positive cash flow after the payback period. In both calculations, NPV and payback period, we forecasted future cash flows. Cash flow from investing in the......

Words: 940 - Pages: 4

Premium Essay

Aurora Textile Company

...Case Study 4 Stephanie M. Clark Capella University Aurora Textile Company was established in the early 1900s as a yarn manufacturer. The company focused on four major customer segments, which were hosiery, knitted outerwear, woven and industrial and specialty products. Aurora Textile Company grew to become the leader in the textile-mill industry. In more recent years, changes in the market led to significant declines in financial performance for both Aurora and the U.S. textile industry over the last four years. The globalization of the textile market and the lure of cheaper production costs overseas led manufacturers to relocate to Asia. Also, the strength of the U.S. dollar made foreign produced textiles more affordable than domestically produced textiles. Additionally, the World Trade Organization (WTO) banned its members from using quotas, which further opened the market for competition. The negative financial impact of these changes in the textile industry required Aurora’s leadership to analyze the competitive strategy of the organization and to make recommendations to improve its financial performance. Aurora’s leadership identified the purchase of a new, ring-spinning machine, the Zinser 351, as one solution to improve its current financial performance and competitive position (Bruner et al., 2014). This purpose of this paper is to make a recommendation either to upgrade or to not upgrade the ring-spinning machine. First, this paper will analyze the impact of......

Words: 1210 - Pages: 5

Premium Essay

Auroa Textile

...– both expenses • SG&A Exppenses o Net sales * 7% (given) • Depreciation & Amortization o Cost of the new machine 852,000,000 / 10 years o 825,000 • Operating profit o Gross margin – expenses- dep & amort • Income Tax Provision o EBiT * 36% tax bracket • Net Income o (Operating profit- income tax) + dep Recommendations The U.S. textile industry is going through a tumultuous time, and most companies are experiencing losses. However, as the industry evolves Aurora Textile Company needs to innovate to stay competitive. The industry is moving toward demand for a higher quality product, and Aurora cannot afford to fall behind. The Zinser machine will help Aurora meet this demand. Taking all of this into consideration Aurora should invest in the project. In addition to accepting this project, falling spot prices for cotton could be beneficial to Aurora Textile Company in the future. However, the company also needs to implement other strategies to improve their profit margins, including reducing operating costs and appropriately managing inventory and account receivables. These changes will help Aurora move in the right direction to ensure that they are not forced to shut down operations in the foreseeable future...

Words: 486 - Pages: 2

Premium Essay

Aurora Textile Company

...CASE 21: AURORA TEXTILE COMPANY Q1. How has Aurora Textile performed over the past four years? Be prepared to provide financial ratios that clear present a clear picture of Aurora’s financial condition? A- From 1999 – 2002, Aurora Textiles Company’s financial performance was unappealing and disheartening. Like many of its competitors, Aurora had been struggling financially. The company had not responded quickly to the deteriorating business environment, and had suffered consecutive losses for the past four years. Figure 1: Net Earnings of Aurora Textile Company (1999-2002) The graph above shows the net earnings of the company from 1999-2002. As we see, throughout the years, the net earnings have declined and resulted in a loss, especially in 2001. This could be attributed to the business risks that arose from the intense competition that characterized the industry in which Aurora operates. Moreover in January 2005, the US textile industry experienced intense competition when the WTO lifted the ban on quotas, which worsened Aurora’s financial condition and its credit rating of BB. The main reason for the decline in net earnings was due to the textile industry facing difficult circumstances. Figure 2: Financial ratios (1999-2002) The above table shows the financial ratios of the company from 1999-2000. Measures of probability have worsened during these years as ROA and ROE have been declining. Net sales have been steadily declining which led to management’s...

Words: 1661 - Pages: 7

Free Essay

Textile

...Colorfastness refers to the resistance of color to fade or bleed of a dyed or printed textile materials against water, light, rubbing, washing, perspiration etc. to which they are normally exposed in textile manufacturing and in daily use. Colorfastness to Rubbing Colorfastness to rubbing test is designed to determine the degree of color which may be transferred from the surface of a colored fabric to a specify test cloth for rubbing (which could be dry and Wet). Crockmeter is the main equipment used in this test. Crockmeter uses a standard pressure and rubbing motion to provide reliable and reproducible test results. Specimens are positioned on the base of the Crockmeter and held in place with the sample holder. The rubbing action is provided by an acrylic "finger" which moves in a straight line with each complete turn of the crank. The reciprocating load arm is weighted to provide a constant 9N load on the sample at all times and a mechanical counter keeps track of completed cycles. Then, the result of the specimen is evaluated using the grey scale of staining. Colorfastness to Washing The main test method of the colorfastness to washing is carried out called AATCC standard detergent WOB (without optical brightener). The test measures the resistance to water of any colored textiles. Launder-moester is the main equipments used with the help of grey scales. Testing procedure (Usages) 1. Attach the multifiber fabric to specimen by sewing or stapling. 2. Place the......

Words: 514 - Pages: 3

Premium Essay

Textiles

...The CEO of Terrapin Textiles Ltd. was impressed by Janet W., an enthusiastic MBA graduate with creative ideas. He was not concerned by her lack of management experience and entrusted her to represent him and make major decisions in his absence. Other senior managers and employees observed unethical and questionable behavior from Janet. She appeared to limit communication between them and the CEO, was manipulative, and had little interest in the business. The victims of Janet’s behavior found themselves in a catch-22 situation. They knew Janet’s behavior was unethical, but feared they would face retaliation for addressing it. Whistle blowing is only perceived as positive when it is handled effectively and results in corrective action (Near & Miceli, 1995, p. 679). Janet’s secretary approached HR about her concerns, but was asked to sign a statement or discuss it with the CEO. HR’s approach to the situation put pressure and responsibility on the secretary to correct Janet’s behavior. It is likely she feared for her job because she was not confident HR and the CEO would resolve the manner in her favor. “Rather than framing interpersonal mistreatment in organizations as a private problem for individuals to resolve, we should hold organizations responsible for managing misbehavior within” (Cortina and Magley, 2003, p. x). HR needs a better method for addressing employee concerns about unethical behavior. Janet’s secretary may have felt more comfortable......

Words: 452 - Pages: 2

Premium Essay

Aurora

...Case Questions 1. How has Aurora Textile performed over the past four years? Be prepared to provide financial ratios that present a clear picture of Aurora’s financial condition. From 1999 through 2002, the financial performance of Aurora was unattractive and disheartening. This could be attributed to the business risks that arose from the intense competition that characterizes the industry in which Aurora operates. Absent an industry benchmark or comparable with which to gauge the performance of Aurora, we utilized a trend analysis of the period 1999 through 2002. With 1999 as a reference point, we noticed that all measures of profitability have worsened. On a cumulative annual basis, net sales have been declining by 15%, while profit margins and ROA were always in the negative (see exhibit 1). While raw material cost as a percentage of net sales have been declining, the cost of conversion is escalating and affecting the bottom-line (see exhibit 1). It is obvious that Aurora needs to manage its expenses to generate profits from sales. While on the surface, the liquidity measures have improved (see exhibit 1), it is doubtful that the company has the ability to meet its current obligations with just cash and cash equivalents on hand. This is partially due to the fact that many of the firm’s current assets are predominantly account receivables and inventories. While it is true that the firm, its competitors, and the industry are continuing to lose money, an effective......

Words: 1937 - Pages: 8

Free Essay

Textile

...blue) warp and white filling threads; it is also woven in colored stripes. The name is said to have originated in French serge de Nimes. The word comes from the name of a sturdy fabric called serge.  Denim was originally called serge de Nimes, it was then soon shortened to Denim. Denim is yard-dyed and mill-finished and is usually all-cotton, although considerable quantities are of a cotton-synthetic fiber mixture. Decades of use in the clothing industry, especially in manufacture of overalls and trousers were worn for heavy labour such as construction workers and electrical workers. Denim has demonstrated denim’s durability. This quality also made denim serviceable for leisurewear in the late 20th Century. Denim is a rugged cotton twill textile, in which the weft passes under two or more warp fibers. This produces the familiar diagonal ribbing identifiable on the reverse of the fabric, which distinguishes denim from cotton duck. It is a twill-weave woven fabric that uses different colors for the warp and weft. One color is predominant on the fabric surface. Because of this twill weave, it means the fabric is very strong. I believe Denim is the most amazing fabric out there it’s versatile, it’s tough, its durable,, its easy to work with, its fashionable, its warm I mean I can go one with how great denim is. I mean everyone owns denim. Once before it was only worn by workers and it was popular because of the durability and tough texture. In1800’s American gold miners......

Words: 2714 - Pages: 11

Free Essay

Textiles

... It   drives  every  aspect  of  our  business  -­‐  from  leading  innovative   technologies,  to  developing  path-­‐breaking  products,  to  fostering   sustainability.     Business  Scenario     As  you  are  all  aware,  India  has  emerged  as  a  significant  player  in  the   textiles  sector,  and  is  currently  ranked  as  the  second  largest  exporter  of   textile  products  behind  China.  As  I  mentioned  in  my  last  year’s  address,   certain  structural  changes  are  taking  place  in  the  industry,  which  are   helping  India  improve  its  competitiveness  and  market  share  in  the   global  arena.  We  are  thus  seeing  more  and  more  clients  increase  their   sourcing  pie  of  textile  and  apparel  from  India.  In  home  textiles,  the  India   advantage  has  been  even  more  prominent  and  I  believe,  things  are  only   going  to  get  better  in  the  coming  years  for  the  industry.     At  Welspun,  we  continue  to  be  a  supplier  of  choice  for  our  clients  as   evidenced ......

Words: 3333 - Pages: 14

Free Essay

Aurora Textile Company

...AURORA TEXTILE COMPANY KEUANGAN PERUSAHAAN LANJUTAN Tugas Disusun oleh Audrya Puspita (1306415024) Joddy Eka Negara (1306395350) Richie Wibisono (1306408675) FAKULTAS EKONOMI DAN BISNIS UNIVESITAS INDONESIA Depok 2016 AURORA TEXTILE COMPANY Aurora Textile Company merupakan sebuah perusahaan tekstil yang memproduksi benang yang telah berdiri lama sejak awal 1900-an di Ameika Serikat. Pada Tahun 2003, Michael Pogonowski sebagai CFO Aurora Textile Company mempertimbangkan tentang pengadaan mesin baru ring-spinning Zinser 351 untuk menggantikan mesin lama yang telah ada sejak tahun 1997 di Hunter. Penggantian mesin baru tersebut diperkirakan dapat memberikan banyak kemajuan bagi perusahaan karena selain mesin tersebut dapat membuat produktivitas meningkat, keberadaan mesin tersebut juga dapat memberikan hasil produksi benang yang lebih berkualitas. Dengan meningkatnya kualitas produksi, maka akan menyebabkan harga benang yang dijual akan naik sebesar 10%, yaitu $1.0235 per pon. Selain itu, mesin tersebut juga mampu membuat biaya operasi dalam produksi menjadi lebih efisien karena adanya penurunan biaya operasi seperti penurunan konsumsi tenaga pembangkit dan biaya perawatan karena perusahaan menggunakan mesin rotor-spinning dan ring-spinning. Pengambilan keputusan untuk melakukan investasi pada mesin Zinster 351 berdampak pada jumlah penjualan yang akan turun sebesar 5% dari pasar tahun berjalan. Selain itu, hal tersebut juga akan berdampak pada kemungkinan terjadinya......

Words: 898 - Pages: 4