Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1 . Caspian Sea Drinks is considering the purchase of a plum juicer the PJX 5 . There is no planned increase in production. The

1. Caspian Sea Drinks is considering the purchase of a plum juicer the PJX5. There is no planned increase in production. The PJX5 will reduce costs by squeezing more juice from each plum and doing so in a more efficient manner. Mr. Bensen gave Derek the following information. What is the NPV of the PJX5?
a. The PJX5 will cost $2.08 million fully installed and has a 10 year life. It will be depreciated to a book value of $130,652.00 and sold for that amount in year 10.
b. The Engineering Department spent $34,614.00 researching the various juicers.
c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $21,731.00.
d. The PJX5 will reduce operating costs by $309,902.00 per year.
e. CSDs marginal tax rate is 34.00%.
f. CSD is 58.00% equity-financed.
g. CSDs 11.00-year, semi-annual pay, 5.06% coupon bond sells for $1,006.00.
h. CSDs stock currently has a market value of $24.33 and Mr. Bensen believes the market estimates that dividends will grow at 4.14% forever. Next years dividend is projected to be $1.77.(The correct answer should be: -$202,609.68) Show me how in excel
2. Caspian Sea Drinks is considering the purchase of a plum juicer the PJX5. There is no planned increase in production. The PJX5 will reduce costs by squeezing more juice from each plum and doing so in a more efficient manner. Mr. Bensen gave Derek the following information. What is the IRR of the PJX5?
a. The PJX5 will cost $1.91 million fully installed and has a 10 year life. It will be depreciated to a book value of $164,020.00 and sold for that amount in year 10.
b. The Engineering Department spent $18,537.00 researching the various juicers.
c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $19,314.00.
d. The PJX5 will reduce operating costs by $342,610.00 per year.
e. CSDs marginal tax rate is 37.00%.
f. CSD is 58.00% equity-financed.
g. CSDs 10.00-year, semi-annual pay, 6.65% coupon bond sells for $965.00.
h. CSDs stock currently has a market value of $21.75 and Mr. Bensen believes the market estimates that dividends will grow at 3.85% forever. Next years dividend is projected to be $1.77.
**USE EXCEL AND SHOW ALL THE CALULATIONS/ FORMULAS**

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Gapenskis Cases In Healthcare Finance

Authors: George H. Pink

6th Edition

1567939651, 978-1567939651

More Books

Students also viewed these Finance questions