Antai College of Economics and Management
Case study: Capital budget
for Pressco. Inc
Teamï¼ Jian Feiyi 1091209040
Zhang Yangyi 1091209041
Shi Yanã 1091209053
Ge Mengfei 1091209051
Tong Xuemin 1091209031
March 2010
Abstract
Ms. Rogers, a marketing representative for Pressco, Inc., spares no effort to persuade its potential customers like Paperco to sign a binding contracts of purchasing new mechanical drying equipment. In view of the uncertainty about whether a rumored new tax legislation will come into effect or not, company like Paperco must examine the net present value of the old facility and new purchasing (with ITC earned or not) respectively in order to decide if it's worth investing. In this paper, net present value of new facility under both existing and rumored tax legislation are calculated, as well as the expected cost savings for Paperco. On this basis, we are trying to make some suggestions on the standpoint of Pressco and its counterparts with the help of sensitivity analysis method, and finally our takeaways.
English: United States Internal Revenue Service Cr...
Exterior of the Internal Revenue Service office in...
Logo of Internal Revenue Service, USAKeywords: Cash Flow, Net Present Value, Investment Tax Credit(ITC)
Content
41.1 Parties related �
41.2 Investment tax credit (ITC) �
51.3 Rumored tax legislation �
52. Financial analysis �
62.1 NPV for equipment replacement without tax change �
72.2 NPV for equipment replacement under new tax legislation �
82.3 NPV for equipment replacement without ITC �
93. Dynamic financial analysis �
103.1 floating cost saving �
123.2 floating price the equipment investment �
153.3 Adjusted discount rate �
164. Conclusions and suggestions �
164.1 Conclusions �
174.2 Suggestions for both parties �
175. Takeaways �
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Investment background
Parties related
Presso. Inc: a company in the line of mechanical drying equipment
Paperco: a potential customer of Pressco. Inc.
Jane Rogers: a marketing representative for Pressco
In the year 1984, Jane...