36.

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 $1.99 million fully installed and has a 10 year life. It will be depreciated to a book value of $168,427.00 and sold for that amount in year 10.

b. The Engineering Department spent $23,012.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $16,612.00.

d. The PJX5 will reduce operating costs by $356,228.00 per year.

e. CSDs marginal tax rate is 29.00%.

f. CSD is 72.00% equity-financed.

g. CSDs 10.00-year, semi-annual pay, 5.60% coupon bond sells for $1,031.00.

h. CSDs stock currently has a market value of $24.69 and Mr. Bensen believes the market estimates that dividends will grow at 4.44% forever. Next years dividend is projected to be $1.76.