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 $1.63 million fully installed and has a 10 year life. It will be depreciated to a book value of $130,015.00 and sold for that amount in year 10.

b. The Engineering Department spent $42,130.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $24,343.00.

d. The PJX5 will reduce operating costs by $417,148.00 per year.

e. CSD's marginal tax rate is 20.00%.

f. CSD is 61.00% equity-financed.

g. CSD's 11.00-year, semi-annual pay, 6.25% coupon bond sells for $1,045.00.

h. CSD's stock currently has a market value of $24.58 and Mr. Bensen believes the market estimates that dividends will grow at 3.49% forever. Next year's dividend is projected to be $1.55.

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#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 $2.17 million fully installed and has a 10 year life. It will be depreciated to a book value of $135,529.00 and sold for that amount in year 10.

b. The Engineering Department spent $27,640.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $23,168.00.

d. The PJX5 will reduce operating costs by $494,452.00 per year.

e. CSD's marginal tax rate is 30.00%.

f. CSD is 61.00% equity-financed.

g. CSD's 18.00-year, semi-annual pay, 6.71% coupon bond sells for $1,047.00.

h. CSD's stock currently has a market value of $20.60 and Mr. Bensen believes the market estimates that dividends will grow at 4.26% forever. Next year's dividend is projected to be $1.53.

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#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 $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 $1.20 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $8.65 million per year and cost $2.26 million per year over the 10-year life of the project. Marketing estimates 15.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 23.00%. The WACC is 14.00%. Find the NPV (net present value).

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#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 $26.00 million. The plant and equipment will be depreciated over 10 years to a book value of $1.00 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 $8.57 million per year and cost $2.02 million per year over the 10-year life of the project. Marketing estimates 15.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 30.00%. The WACC is 14.00%. Find the IRR (internal rate of return).

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Answer format:Percentage Round to: 4 decimal places (Example: 9.2434%, % sign required. Will accept decimal format rounded to 6 decimal places (ex: 0.092434))