Challenge

An industrial property consisting of various manufacturing machinery and equipment was a candidate for an ad valorem tax reduction. We were engaged to provide valuations of the subject property and the business enterprise associated with the subject taxable assets.

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Solution

Our analysis considered the history and nature of the business and the status of the industry and technology applied in the manufacture of the products of the company. Our conclusions showed that there had been a material decline in the industry as well as technological improvements that had significantly affected the profitability of the company. The valuation of the subject assets considered physical depreciation and economic and functional obsolescence. In this case, the extraordinary economic obsolescence was regarded as permanent and abnormal because it was determined that there were fundamental changes in the industry which would probably not be corrected over time. These changes would have a lasting effect on profitability.

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