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 IRR of the PJX5?
a. The PJX5 will cost $1.93 million fully installed and has a 10 year life. It will be depreciated to a book value of $118,429.00 and sold for that amount in year 10.
b. The Engineering Department spent $44,763.00 researching the various juicers.
c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $20,597.00.
d. The PJX5 will reduce operating costs by $478,048.00 per year.
e. CSDs marginal tax rate is 31.00%.
f. CSD is 70.00% equity-financed.
g. CSDs 10.00-year, semi-annual pay, 5.76% coupon bond sells for $1,001.00.
h. CSDs stock currently has a market value of $23.62 and Mr. Bensen believes the market estimates that dividends will grow at 2.75% forever. Next years dividend is projected to be $1.56.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started