Question
1-a) Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube Goldberg Machines. This new equipment, the RGM-7000, will
1-a) Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube Goldberg Machines. This new equipment, the RGM-7000, will allow Caspian Sea Drinks to expand production. It will cost $12.00 million fully installed and will be fully depreciated over a 19.00 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $2.99 million per year and increased operating costs of $788,660.00 per year. Caspian Sea Drinks' marginal tax rate is 21.00%. The incremental cash flows for produced by the RGM-7000 are _____.Answer format: Currency: Round to: 2 decimal places.
1-b) Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube Goldberg Machines. This new equipment, the RGM-7000, will allow Caspian Sea Drinks to expand production. It will cost $13.00 million fully installed and will be fully depreciated over a 15 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $3.37 million per year and increased operating costs of $657,768.00 per year. Caspian Sea Drinks' marginal tax rate is 22.00%. The internal rate of return for the RGM-7000 is _____.Answer format: Percentage Round to: 4 decimal places .
1-c) Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube Goldberg Machines. This new equipment, the RGM-7000, will allow Caspian Sea Drinks to expand production. It will cost $13.00 million fully installed and will be fully depreciated over a 20 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $2.87 million per year and increased operating costs of $601,962.00 per year. Caspian Sea Drinks' marginal tax rate is 32.00%. If Caspian Sea Drinks uses a 12.00% discount rate, then the net present value of the RGM-7000 is _____. Answer format: Currency: Round to: 2 decimal places
1-d) Caspian Sea Drinks' is financed with 60.00% equity and the remainder in debt. They have 11.00-year, semi-annual pay, 5.12% coupon bonds which sell for 98.48% of par. Their stock currently has a market value of $24.38 and Mr. Bensen believes the market estimates that dividends will grow at 3.14% forever. Next years dividend is projected to be $2.29. Assuming a marginal tax rate of 25.00%, what is their WACC (weighted average cost of capital)? Answer format: Percentage Round to: 2 decimal places
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