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 $1.76 million fully installed and has a 10 year life. It will be depreciated to a book value of $156,558.00 and sold for that amount in year 10.

b. The Engineering Department spent $40,663.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $19,724.00.

d. The PJX5 will reduce operating costs by $479,768.00 per year.

e. CSDs marginal tax rate is 26.00%.

f. CSD is 61.00% equity-financed.

g. CSDs 10.00-year, semi-annual pay, 6.16% coupon bond sells for $1,023.00.

h. CSDs stock currently has a market value of $22.45 and Mr. Bensen believes the market estimates that dividends will grow at 4.27% forever. Next years dividend is projected to be $1.73.

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 $1.86 million fully installed and has a 10 year life. It will be depreciated to a book value of $149,130.00 and sold for that amount in year 10.

b. The Engineering Department spent $22,574.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $16,337.00.

d. The PJX5 will reduce operating costs by $463,803.00 per year.

e. CSDs marginal tax rate is 36.00%.

f. CSD is 64.00% equity-financed.

g. CSDs 13.00-year, semi-annual pay, 5.01% coupon bond sells for $987.00.

h. CSDs stock currently has a market value of $22.99 and Mr. Bensen believes the market estimates that dividends will grow at 2.76% forever. Next years dividend is projected to be $1.68.

3.Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the purchase of the equipment necessary to produce the diet drink will cost $22.00 million. The plant and equipment will be depreciated over 10 years to a book value of $3.00 million, and sold for that amount in year 10. Net working capital will increase by $1.24 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $9.08 million per year and cost $2.22 million per year over the 10-year life of the project. Marketing estimates 15.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 28.00%. The WACC is 10.00%. Find the NPV (net present value).

4.Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the purchase of the equipment necessary to produce the diet drink will cost $24.00 million. The plant and equipment will be depreciated over 10 years to a book value of $1.00 million, and sold for that amount in year 10. Net working capital will increase by $1.26 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $9.03 million per year and cost $2.14 million per year over the 10-year life of the project. Marketing estimates 16.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 32.00%. The WACC is 11.00%. Find the IRR (internal rate of return).