I. EXECUTIVE SUMMARY As an additional incentive for our customers to frequent our steel products, we have chosen to provide them with special services, one of which is cold drawn steel. However, some equipment is required to produce such a product. We currently have on our hands a 57 year old wire bench that has a bad reputation for consuming too much energy, producing a lot of waste and needing too many expensive repairs. Even if it may seem useless to us to invest in a department in which we are not specialized, we must also consider that offering Cold Drawn Steel (CDS) is our competitive advantage; it is our differentiation strategy from our competitors. Giving up this service could displease our customers and sever ties that have taken us years to build. You, as president, suggested buying from outside and reselling the CDS. However, based on the income comparison analysis between these two alternatives, producing the CDS ourselves will produce $5,000 more in income per year. We therefore recommend that we continue our operations in the CDS department. Therefore, we must address the problem of production inefficiency of this department. As mentioned above, the root of the problem lies in the aging of the equipment. At this point we have to choose whether to repair the equipment or replace it with a new one, once and for all. An evaluation of the net present value and internal rate of return approach shows that investing money in acquiring a new drawing bench will yield greater returns than our cost of capital (10%). Furthermore, the payback period approach shows that we would be able to recoup our initial investment at the end of 6 years and 2 months - a far cry from the total useful life of the equipment of 50+ years. We also need to take a look at the qualitative factors that impact our decision. First of all we must evaluate whether the purchase of a new drawing machine will contribute to the future plans of our company. Our long-term goal is to build strong and profitable relationships with customers and we can only do this by providing solutions to customers, namely cold drawn steel. We therefore recommend the purchase of a new drawing bench as it is in line with our development strategy for the CDS department. After all, we don't want to be labeled as laggards in the industry, we need to keep up with practical improvements in technology, because in the end both our customers and our company benefit.