American Forge Corp.

The proposed engine investment is expected to yield an internal rate of return of almost 20 percent after taxes for at least ten years. This comes at a time when the company has greatly improved their profitability. Earnings doubled in 1982 as a result of improvements in the gross margin. The company's gross margin improved to more than 16% of total sales. This can be attributed to AFC's continued efforts of weeding out unprofitable and marginal products. Although the company's recent performance is promising, the only foreseeable source for an increase in earnings is the aluminum engine project.

Although the company is very excited about the aluminum engine project, there are some concerns and risks. For instance, market acceptance, even for a superior machine, might be more difficult to achieve than anticipated. Production costs might vary significantly from engineered levels. New alloys could make the engine obsolete. In summary, given the risks associated with the competitive and technological uncertainties o

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Approximate Word count = 1123
Approximate Pages = 4 (250 words per page)

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