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 $1.83 million fully installed and has a 10 year life. It will be depreciated to a book value of $155,329.00 and sold for that amount in year 10.

b. The Engineering Department spent $32,923.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $20,506.00.

d. The PJX5 will reduce operating costs by $480,474.00 per year.

e. CSDs marginal tax rate is 29.00%.

f. CSD is 56.00% equity-financed.

g. CSDs 15.00-year, semi-annual pay, 5.67% coupon bond sells for $965.00.

h. CSDs stock currently has a market value of $24.15 and Mr. Bensen believes the market estimates that dividends will grow at 2.35% forever. Next years dividend is projected to be $1.48.

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 $2.21 million fully installed and has a 10 year life. It will be depreciated to a book value of $114,067.00 and sold for that amount in year 10.

b. The Engineering Department spent $19,370.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $23,710.00.

d. The PJX5 will reduce operating costs by $388,188.00 per year.

e. CSDs marginal tax rate is 22.00%.

f. CSD is 70.00% equity-financed.

g. CSDs 18.00-year, semi-annual pay, 5.70% coupon bond sells for $1,020.00.

h. CSDs stock currently has a market value of $21.38 and Mr. Bensen believes the market estimates that dividends will grow at 3.73% forever. Next years dividend is projected to be $1.53.

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