# Allegro Case Analysis

398 Words2 Pages
From my evaluation of the information provided by Franklin Printers of Fort Lauderdale, FL their suggestion to have the sum of the simple cash flow from the investment be positive after a maximum of 5 years is a very extreme bid for Abcor to meet. In order for Abcor to meet their requirement Abcor will have to discount their machine from \$12,000 to \$6,000, which is a 50% discount. This will cause Abcor to only make \$3,734 DCF (Figure 3.1) after 5 years, which isn’t a great profit for a company over 5 years. Looking at the break-even analysis graph(Figure 3.2) it seems this could be a solution, but the confirmation of this being a bad bid can be found in the Cash Flow vs Machine Cost graph (Figure 3.3), where we can see that the buyers DCF is constantly in the negative. This shows us that discounting the machine will not bring positive cash flows to the buying company. This GRAPH shows us that even though they would’ve met their 5 years maximum plan this opportunity of an investment would not be good because the values we get from the Buyers DCF is less than the current cost of the investment. I would have to decline this bid. Year | Number of Plates | Old Price Per Plate | New Price Per Plate | Buyer Cash Flow | Buyer DCF | Seller Cash Flow | Seller DCF | 1 | 225 | 5.00 | \$2.00 | (\$5,325) | (\$5,325) | \$2,335 | \$2,335 | 2 | 225 | 5.15 | \$2.06 | \$695 | \$695 | \$329 | \$329 | 3 | 225 | 5.30 | \$2.12 | \$716 | \$716 | \$342 | \$342 | 4 | 225 | 5.46 | \$2.19 | \$738 | \$738 | \$357 | \$357 | 5 | 225 | 5.63 | \$2.25 | \$760 | \$760 | \$371 | \$371 | Year | Number of Plates | Old Price Per Plate | New Price Per Plate | Buyer Cash Flow | Buyer DCF | Seller Cash Flow | Seller DCF | | | | Totals | \$584 | \$584 | \$3,734 | \$3,734 | Client-Specific Parameters | | | | | | | Salvage Value (new machine) | \$3,000 | | Salvage value of a new