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 $2.43 million fully installed and has a 10 year life. It will be depreciated to a book value of $223,533.00 and sold for that amount in year 10.

b. The Engineering Department spent $31,923.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $21,172.00.

d. The PJX5 will reduce operating costs by $462,579.00 per year.

e. CSDs marginal tax rate is 28.00%.

f. CSD is 69.00% equity-financed.

g. CSDs 14.00-year, semi-annual pay, 6.59% coupon bond sells for $1,019.00.

h. CSDs stock currently has a market value of $21.73 and Mr. Bensen believes the market estimates that dividends will grow at 3.55% forever. Next years dividend is projected to be $1.71.

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