A firm is must choose to buy the GSU 3300 or the UGA 3000 Both machines make the firm's production process more efficient which in turn increases incremental cash flows The GSU 3300 produces incremental cash flows of $26,405 00 per year for 8 years and costs $103,001 00 The UGA 3000 produces incremental cash flows of $29,495 00 per year for 9 years and cost $126,917 00 The firm's WACC is 9 62 What is the equivalent annual annuity of the UGA 3000 Assume that there are no taxes 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 $25 00 million The plant and equipment will be depreciated over 10 years to a book value of $2 00 million, and sold for that amount in year 10 Net working capital will increase by $1 43 million at the beginning of the project and will be recovered at the end The new diet drink will produce revenues of $9 17 million per year and cost $1 99 million per year over the 10 year life of the project Marketing estimates 18 00 of the buyers of the diet drink will be people who will switch from the regular drink The marginal tax rate is 24 00 The WACC is 14 00 Find the IRR (internal rate of return) 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 $3 08 million per year and increased operating costs of $580,761 00 per year Caspian Sea Drinks' marginal tax rate is 23 00 If Caspian Sea Drinks uses a 11 00 discount rate, then the net present value of the RGM 7000 is 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 00 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 $643,716 00 per year Caspian Sea Drinks' marginal tax rate is 26 00 The incremental cash flows for produced by the RGM 7000 are 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 76 million fully installed and has a 10 year life It will be depreciated to a book value of $187,853 00 and sold for that amount in year 10 b The Engineering Department spent $33,401 00 researching the various juicers c Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $23,218 00 d The PJX5 will reduce operating costs by $359,764 00 per year e CSD's marginal tax rate is 22 00 f CSD is 62 00 equity financed g CSD's 14 00 year, semi annual pay, 6 32 coupon bond sells for $995 00 h CSD's stock currently has a market value of $21 37 and Mr Bensen believes the market estimates that dividends will grow at 3 22 forever Next year's dividend is projected to be $1 44

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on May 17, 2024

A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm's production process more efficient which in turn increases

A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm's production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $26,405.00 per year for 8 years and costs $103,001.00. The UGA-3000 produces incremental cash flows of $29,495.00 per year for 9 years and cost $126,917.00. The firm's WACC is 9.62%. What is the equivalent annual annuity of the UGA-3000? Assume that there are no taxes.
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 $25.00 million. The plant and equipment will be depreciated over 10 years to a book value of $2.00 million, and sold for that amount in year 10. Net working capital will increase by $1.43 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $9.17 million per year and cost $1.99 million per year over the 10-year life of the project. Marketing estimates 18.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 24.00%. The WACC is 14.00%. Find the IRR (internal rate of return).
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 $3.08 million per year and increased operating costs of $580,761.00 per year. Caspian Sea Drinks' marginal tax rate is 23.00%. If Caspian Sea Drinks uses a 11.00% discount rate, then the net present value of the RGM-7000 is _____.
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 20.00 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 $643,716.00 per year. Caspian Sea Drinks' marginal tax rate is 26.00%. The incremental cash flows for produced by the RGM-7000 are _____.
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 $1.76 million fully installed and has a 10 year life. It will be depreciated to a book value of $187,853.00 and sold for that amount in year 10.

b. The Engineering Department spent $33,401.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $23,218.00.

d. The PJX5 will reduce operating costs by $359,764.00 per year.

e. CSD's marginal tax rate is 22.00%.

f. CSD is 62.00% equity-financed.

g. CSD's 14.00-year, semi-annual pay, 6.32% coupon bond sells for $995.00.

h. CSD's stock currently has a market value of $21.37 and Mr. Bensen believes the market estimates that dividends will grow at 3.22% forever. Next year's dividend is projected to be $1.44.