Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 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 $3.25 million per year and increased operating costs of $620,226.00 per year. Caspian Sea Drinks' marginal tax rate is 30.00%. The internal rate of return for 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 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $3.64 million per year and increased operating costs of $699,519.00 per year. Caspian Sea Drinks' marginal tax rate is 26.00%. If Caspian Sea Drinks uses a 9.00% discount rate, then the net present value of the RGM-7000 is _____.

Caspian Sea Drinks' is financed with 69.00% equity and the remainder in debt. They have 11.00-year, semi-annual pay, 5.14% coupon bonds which sell for 97.37% of par. Their stock currently has a market value of $25.28 and Mr. Bensen believes the market estimates that dividends will grow at 3.59% forever. Next years dividend is projected to be $2.54. Assuming a marginal tax rate of 31.00%, what is their WACC (weighted average cost of capital)?

Please answer using copiable Excel cells. Thank you!

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance Markets Investments And Financial Management

Authors: Daisy Scott

1st Edition

1639892001, 9781639892006

More Books

Students also viewed these Finance questions

Question

Prove that Y';ej plim T =@j - QjY j.

Answered: 1 week ago

Question

Can negative outcomes associated with redundancy be avoided?

Answered: 1 week ago

Question

Understand the key features of recruitment and selection policies

Answered: 1 week ago