1a

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 $2.49 million fully installed and has a 10 year life. It will be depreciated to a book value of $143,957.00 and sold for that amount in year 10.

b. The Engineering Department spent $14,514.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $20,963.00.

d. The PJX5 will reduce operating costs by $463,988.00 per year.

e. CSDs marginal tax rate is 20.00%.

f. CSD is 70.00% equity-financed.

g. CSDs 13.00-year, semi-annual pay, 5.57% coupon bond sells for $1,040.00.

h. CSDs stock currently has a market value of $22.40 and Mr. Bensen believes the market estimates that dividends will grow at 2.01% forever. Next years dividend is projected to be $1.79.

Answer format: Percentage Round to: 2 decimal places (Example: 9.24%, % sign required. Will accept decimal format rounded to 4 decimal places (ex: 0.0924))

1b

A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firms production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $25,718.00 per year for 8 years and costs $101,612.00. The UGA-3000 produces incremental cash flows of $27,318.00 per year for 9 years and cost $126,555.00. The firms WACC is 7.29%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.

Answer format: Currency: Round to: 2 decimal places.

1c.

Today is Dereks 25th birthday. Derek has been advised that he needs to have $3,634,811.00 in his retirement account the day he turns 65. He estimates his retirement account will pay 5.00% interest. Assume he chooses not to deposit anything today. Rather he chooses to make annual deposits into the retirement account starting on his 30.00th birthday and ending on his 65th birthday. How much must those deposits be?

Answer format: Currency: Round to: 2 decimal places.