Pressco, Inc.

Case Study

Corporate Finance II
Irakli Salia 17-9
Nino Merabishvili 17-8
 Pressco Inc.
“Mechanical Drying Rumoured Changes in
Equipment” Tax Legislation

❑ Equipment Cost 2 100 ❑ Elimination of ITC (Investement Tax

000 $ Credit)

❑ Installation Cost 800 ❑ Extended Depreciation for New

000 $ Equipment

❑ Cost Saving per year 560 ❑ Corporate Tax Reduction From 46%
000 $ to 34%

❑ Cost of Capital
2
12%
 ❑ Investment Tax
Credit Rate Table

❑ Depreciation Rates

3
Question N1
What is NPV of the Equipment?
 Cost of Capital 12%
 Tax Changes are not enacted

4
Question N2
What is NPV of the Equipment?
 Tax Changes are enacted
 Can be “Grandfathered”

5
Question N3
What is NPV of the Equipment?
 Tax Changes are enacted
 Can not be “Grandfathered”

6
Final NPV of the
Project

7
Question N4
What is the minimal Cost Saving?
 Tax Changes are not enacted

8
Question N4
What is the minimal Cost Saving?
 Can be “Grandfathered”

9
Question N4
What is the minimal Cost Saving?
 Can not be “Grandfathered”

10
Question N4
What is the minimal Cost Saving?
 Tax Changes are not enacted
 Can not “Grandfathered”
 Can not be “Grandfathered”

👆
👆

11
Question N5
What is the maximal Price of the
Equipment?
 Tax Changes are not enacted

12
Question N5
What is the maximal Price of the
Equipment?
 Can be “Grandfathered”

13
Question N5
What is the maximal Price of the
Equipment?
 Can not be “Grandfathered”

14
Question N5
What is the maximal Price of the
Equipment?
 Tax Changes are not enacted
 Can not “Grandfathered”
 Can not be “Grandfathered”

👆
👆
👆

15
Question N6
Fuel Price influence on Forecasted NPV

იქიდან გამომდინარე, რომ

ახალი აღჭურვილობა
მოიხმარს ნაკლებ საწვავს,
ბარელზე ფასის ზრდის
შედეგად წარმოქმნილი ნამეტი
ხარჯების დანაზოგში
აკუმულირდება!

16
THANKS!

17
Question N4
What is minimal Cost Saving?
 Tax Changes are not enacted
 Can not “Grandfathered”
 Can not be “Grandfathered”

18
Question N5
What is the maximal Price of the
Equipment?
 Tax Changes are not enacted
 Can not “Grandfathered”
 Can not be “Grandfathered”

19