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 $254,117.00 and sold for that amount in year 10.

b. The Engineering Department spent $33,627.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $18,895.00.

d. The PJX5 will reduce operating costs by $495,324.00 per year.

e. CSDs marginal tax rate is 37.00%.

f. CSD is 59.00% equity-financed.

g. CSDs 13.00-year, semi-annual pay, 5.45% coupon bond sells for $1,005.00.

h. CSDs stock currently has a market value of $22.54 and Mr. Bensen believes the market estimates that dividends will grow at 3.13% forever. Next years dividend is projected to be $1.57.

Submit

Answer format: Currency: Round to: 2 decimal places.

unanswered

not_submitted

Attempts Remaining: Infinity

#2

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 $2.14 million fully installed and has a 10 year life. It will be depreciated to a book value of $168,015.00 and sold for that amount in year 10.

b. The Engineering Department spent $42,017.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $17,212.00.

d. The PJX5 will reduce operating costs by $423,462.00 per year.

e. CSDs marginal tax rate is 33.00%.

f. CSD is 71.00% equity-financed.

g. CSDs 14.00-year, semi-annual pay, 5.93% coupon bond sells for $952.00.

h. CSDs stock currently has a market value of $21.41 and Mr. Bensen believes the market estimates that dividends will grow at 2.38% forever. Next years dividend is projected to be $1.76.

Submit

Answer format: Percentage Round to: 2 decimal places (Example: 9.24%, % sign required. Will accept decimal format rounded to 4 decimal places (ex: 0.0924))

unanswered

not_submitted

Attempts Remaining: Infinity

#3

Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the purchase of the equipment necessary to produce the diet drink will cost $27.00 million. The plant and equipment will be depreciated over 10 years to a book value of $3.00 million, and sold for that amount in year 10. Net working capital will increase by $1.03 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $8.83 million per year and cost $1.98 million per year over the 10-year life of the project. Marketing estimates 16.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 33.00%. The WACC is 15.00%. Find the NPV (net present value).

Submit

Answer format: Currency: Round to: 2 decimal places.

unanswered

not_submitted

Attempts Remaining: Infinity

#4

Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the purchase of the equipment necessary to produce the diet drink will cost $23.00 million. The plant and equipment will be depreciated over 10 years to a book value of $3.00 million, and sold for that amount in year 10. Net working capital will increase by $1.31 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $8.96 million per year and cost $1.60 million per year over the 10-year life of the project. Marketing estimates 12.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 33.00%. The WACC is 13.00%. Find the IRR (internal rate of return).

Submit

Answer format: Percentage Round to: 4 decimal places (Example: 9.2434%, % sign required. Will accept decimal format rou