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 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 $2.15 million fully installed and has a 10 year life. It will be depreciated to a book value of $140,616.00 and sold for that amount in year 10. b. The Engineering Department spent $35,650.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $18,037.00. d. The PJX5 will reduce operating costs by $305,538.00 per year. e. CSDs marginal tax rate is 35.00%. f. CSD is 56.00% equity-financed. g. CSDs 16.00-year, semi-annual pay, 6.05% coupon bond sells for $1,048.00. h. CSDs stock currently has a market value of $23.27 and Mr. Bensen believes the market estimates that dividends will grow at 3.50% forever. Next years dividend is projected to be $1.54.

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

The Art Of Tehnical Analysis

Authors: Strahinja Osmokrovic

1st Edition

979-8852314680

More Books

Students also viewed these Finance questions

Question

What kinds of companies would be least likely to use LIFO? Explain.

Answered: 1 week ago