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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

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 NPV of the PJX5?

a. The PJX5 will cost $1.88 million fully installed and has a 10 year life. It will be depreciated to a book value of $294,486.00 and sold for that amount in year 10.

b. The Engineering Department spent $46,258.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $17,841.00.

d. The PJX5 will reduce operating costs by $492,203.00 per year.

e. CSDs marginal tax rate is 25.00%.

f. CSD is 59.00% equity-financed.

g. CSDs 11.00-year, semi-annual pay, 5.77% coupon bond sells for $998.00.

h. CSDs stock currently has a market value of $21.56 and Mr. Bensen believes the market estimates that dividends will grow at 3.80% forever. Next years dividend is projected to be $1.56.

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 $2.19 million fully installed and has a 10 year life. It will be depreciated to a book value of $282,426.00 and sold for that amount in year 10.

b. The Engineering Department spent $35,227.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $19,899.00.

d. The PJX5 will reduce operating costs by $304,571.00 per year.

e. CSDs marginal tax rate is 29.00%.

f. CSD is 67.00% equity-financed.

g. CSDs 14.00-year, semi-annual pay, 6.36% coupon bond sells for $976.00.

h. CSDs stock currently has a market value of $21.53 and Mr. Bensen believes the market estimates that dividends will grow at 3.18% forever. Next years dividend is projected to be $1.57.

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