Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Caspian Sea Drinks is considering the purchase of a plum juicer - the PJX5. There is no planned increase in production. The PJX5 will

image text in transcribed

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 $1.65 million fully installed and has a 10 year life. It will be depreciated to a book value of $123,423.00 and sold for that amount in year 10. b. The Engineering Department spent $27,690.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $16,241.00. d. The PJX5 will reduce operating costs by $423,322.00 per year. e. CSD's marginal tax rate is 32.00%. f. CSD is 63.00% equity-financed. g. CSD's 18.00-year, semi-annual pay, 5.66% coupon bond sells for $988.00. h. CSD's stock currently has a market value of $24.98 and Mr. Bensen believes the market estimates that dividends will grow at 3.58% forever. Next year's dividend is projected to be $1.54. Submit Answer format: Percentage Round to: 2 decimal places (Example:

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

Managerial Economics Theory Applications and Cases

Authors: Bruce Allen, Keith Weigelt, Neil A. Doherty, Edwin Mansfield

8th edition

978-0393124491, 393124495, 978-0039391277, 393912779, 978-0393912777

More Books

Students also viewed these Finance questions