Hampton Machine Tool Company Case Anlysis

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ALICANTE, Jeah C. BA 141 / WFY CASTILLO, King Q. Professor Debbie Chua GABAT, Melvi D.R. Bun-Pho Wong VALIENTE, Shirley Ann Y. HAMPTON MACHINE TOOL COMPANY I. BACKGROUND OF THE CASE Hampton Machine Tool Company (HMTC) manufactures tools for aircraft and automobile industries. It has been founded in 1915 and was based in St. Louis area. The business has been successful in the mid and late 1960s due to strong automobile market and heavy defense spending associated with the Vietnam War. However, HMTC’s business slowed down in the 1970s with the withdrawal from the war and the oil embargo. Hampton, though, was able to recover in the late 1970s. It has even increased its market shares with the rise of military aircraft sales mainly because of its conservative policy and strong working capital position. In September 1979, HMTC asked for an extension of its $1,000,000.00 loan until the end of December of the same year from St. Louis National Bank. Also, the company asked for an additional loan of $350,000 that would be repaid December 1979 with interest rate of 1.5%. II. STATEMENT OF THE PROBLEM How should Mr. Jerry Eckwood respond to Mr. Cowen’s requests of the renewal of the existing loan of $1,000,000.00 and of an additional $350,000.00 loan? III. POINT OF VIEW AND ASSUMPTIONS Point of View The group decided to use Mr. Jerry Eckwood’s perspective because the decision whether to extend the loan or to grant the additional $350,000.00 lies in his hands. Assumptions: • Hampton Machine Tools Company will surely pay the dividends on December. • St. Louis Bank will use the loan terms (e.g. month of payment) suggested by HMTC. • The equipment to be acquired by HMTC will not affect the operations of the business until the year ends. IV.

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