Magic Timber & Steel Harvard Case Solution & Analysis

Evaluations of Alternatives:

We have two alternatives with four main problems.

Alternate 1 is to repair the old machine (Matrix).

Alternate 2 is to replace the old machine (Matrix) with the new machine (Delta).

We have ratings 1 to 5 for all the problems where 1 represents the little solution for that problem and 5 represents the complete solution of that problem.

Decision Criteria

ProblemsAlternative-1: Repair MatrixAlternative-2: Replace Matrix with Delta
Decrease in Production Cost13.5
Obsolesce of production machine52
Increase in Profit Margins24
Total89.5

Recommendation:

After analyzing the both alternatives by assigning the ratings according to the decision criteria matrix,we found out that the alternate 2 is suitable for Magic Timber and Steel to go forward with because alternative two provides the almost complete solution of all the main problems faced by the company. Although alternative two provides a negative NPV but it also provides the complete solution of all the four major problems in Magic Timber and Steel. Negative NPV does not include the production estimations that will be obtained from new machine or the estimations of future sales and so on. It just includes the replacement cost for timber production with advanced technology and low cost of production......

 

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