Question
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 $2.05 million fully installed and has a 10 year life. It will be depreciated to a book value of $133,563.00 and sold for that amount in year 10.
b. The Engineering Department spent $37,862.00 researching the various juicers.
c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $18,561.00.
d. The PJX5 will reduce operating costs by $316,764.00 per year.
e. CSDs marginal tax rate is 29.00%.
f. CSD is 61.00% equity-financed.
g. CSDs 17.00-year, semi-annual pay, 5.35% coupon bond sells for $977.00.
h. CSDs stock currently has a market value of $20.32 and Mr. Bensen believes the market estimates that dividends will grow at 2.14% forever. Next years dividend is projected to be $1.47.
Answer format: Currency: Round to: 2 decimal places.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started