The Italian Custom Containers Corporation
The Italian Custom Containers Corporation (ICC) is examining a way forward by looking to attract more revenue. This will boost the income and incentives of the company. The company is looking to invest in Georgia. The company will put up a turnkey plant that is responsible for the production of customized plastic industrial chemical containers. The containers being produced are expected to meet the EU specifications and regulations to enable the selling of the containers in the region. The Board of Directors of the Corporation has chosen to investigate the offer that has been issued to them by the Georgian government.
The board has determined to make the investment that is to be launched in 2021. The board believes that the investment will greatly boost its revenue. This is because it will take advantage of the growing the trade of the two countries – Italy and Georgia. The report will discuss the financial analysis of the project investment in the country and also issue a risk analysis of the project to guide the directors pick a decision on whether to invest on the project or not.
The financial analysis will investigate whether the implementation of the project in Georgia will earn the ICC corporation incentives or not. From the analysis, the revenue that is gotten from the sale of the containers will determine whether the investment is profitable. From the financial analysis; it is verified that the project will generate a profit of Gel 8,013.20 annually. This means that when the ICC directors decide to invest in the country then the corporation will earn more revenue from the trade.
The production of the chemical containers will earn a revenue of Gel 15,410.00 from the production of the expected 4600 containers. The depreciation is then subtracted from the revenue earned. The revenue calculated is found to be Gel 5,136.67. The Profit Before Depreciation and Taxation is found to be Gel 10, 273.33. In conclusion, the operations lead to the getting of profit after tax which is calculated to be Gel 8,013.20. The amount is positive showing that the investment would lead to incentives. This shows that the investment would be profitable for the directors of ICC Corporation.
Financial analysis of the investment
| containers produced | Gel |
| 4600 | £15,410.00 |
| less: Depreciation | £5,136.67 |
| PBTDA | £10,273.33 |
| less: tax | £2,260.13 |
| PAT | £8,013.20 |
Risk analysis involves the identification and analyzation of the potential issues that could lead the investments and projects to an undesirable state. The process is done to reduce the risks that may lead the corporation and organizations to post negative results. Various tools can be used in risk analysis. The risk analysis will assist in a very big way to measure the risks involved in the trade of the containers and measures that can be put in place to salvage the trade. This will assist in boosting trade I the region.
The method that will be utilized in our analysis of risks is the Net Present Value that is easy to calculate and understand. NPV indicates how much the investment adds to the organization. The method estimates the future values of the projected variables. The information used is of specific events that have occurred that are used to determine the future occurrence of investment to show whether the project implementation is profitable or unprofitable. The method will utilize a formula that is shown below:
NPV =
Where: Rt is the net cash flow at the time t
T is the time for the cash flow
i is the discount rate
The net cash flow in our case would be the profit that is garnered annually. The cashflow would be Gel 8,013.20. The discount rate would be 6% and the time t would be 3 years. The NPV value is determined to be Gel 6, 728.04.
NPV =
The value shows that the expected future profits would be Gel 6, 728.04. This shows that with the initial investment put in place by the company, then the company will yield maximumly with the other factors held constant. The company is also set to receive an income of the excess cash flow that will be generated. The income will be invested monthly for two years. The income would be additional income for the organization, hence, more incentives. The incentives can be calculated as shown below.
FV = 8,013.20 (1+0.06)36
FV = 65,285.56
This will be an additional income from the profits made. This income adds to the incentives and makes the company have generated more revenue from the trade of the containers. This will be profitable for the company. This will make the ICC corporation earn more revenue.
I would, therefore, advocate for the directors of the corporation to undertake the project and investment in Georgia. This is because the investment will lead to much incentives as is proven by the financial analysis and risk analysis that has been done above.