1. Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and sell more product. The machine cost $1.64 million and create incremental cash flows of $778,489.00 each year for the next five years. The cost of capital is 9.72%. What is the net present value of the J-Mix 2000?
2. Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and sell more product. The machine cost $1.91 million and create incremental cash flows of $430,027.00 each year for the next five years. The cost of capital is 10.04%. What is the internal rate of return for the J-Mix 2000?
3. Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and sell more product. The machine cost $1.69 million and create incremental cash flows of $523,720.00 each year for the next five years. The cost of capital is 8.44%. What is the profitability index for the J-Mix 2000?
4. Derek plans to buy a $26,129.00 car. The dealership offers zero percent financing for 56.00 months with the first payment due at signing (today). Derek would be willing to pay for the car in full today if the dealership offers him $____ cash back. He can borrow money from his bank at an interest rate of 4.03%.
5. Derek decides to buy a new car. The dealership offers him a choice of paying $544.00 per month for 5 years (with the first payment due next month) or paying some $28,827.00 today. He can borrow money from his bank to buy the car. What interest rate makes him indifferent between the two options?
6. 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 17.00 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $2.66 million per year and increased operating costs of $771,571.00 per year. Caspian Sea Drinks' marginal tax rate is 32.00%. The incremental cash flows for produced by the RGM-7000 are _____.
7. 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 $14.00 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 $2.84 million per year and increased operating costs of $758,942.00 per year. Caspian Sea Drinks' marginal tax rate is 20.00%. The internal rate of return for the RGM-7000 is _____.
8. 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 20 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $2.84 million per year and increased operating costs of $551,383.00 per year. Caspian Sea Drinks' marginal tax rate is 33.00%. If Caspian Sea Drinks uses a 9.00% discount rate, then the net present value of the RGM-7000 is _____.
9. Assume a par value of $1,000. Caspian Sea plans to issue a 11.00 year, semi-annual pay bond that has a coupon rate of 8.09%. If the yield to maturity for the bond is 7.87%, what will the price of the bond be?
10. Assume a par value of $1,000. Caspian Sea plans to issue a 17.00 year, semi-annual pay bond that has a coupon rate of 7.84%. If the yield to maturity for the bond is 8.37%, what will the price of the bond be?