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 $2.17 million fully installed and has a 10 year life. It will be depreciated to a book value of $180,029.00 and sold for that amount in year 10.
b. The Engineering Department spent $12,358.00 researching the various juicers.
c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $21,317.00.
d. The PJX5 will reduce operating costs by $301,349.00 per year.
e. CSDs marginal tax rate is 37.00%.
f. CSD is 63.00% equity-financed.
g. CSDs 14.00-year, semi-annual pay, 5.11% coupon bond sells for $995.00.
h. CSDs stock currently has a market value of $24.08 and Mr. Bensen believes the market estimates that dividends will grow at 2.85% forever. Next years dividend is projected to be $1.67.
Please try to do it in excel with the formula.
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