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 $2.17 million fully installed and has a 10 year life. It will be depreciated to a book value of $195,498.00 and sold for that amount in year 10.

b. The Engineering Department spent $33,048.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $21,452.00.

d. The PJX5 will reduce operating costs by $358,562.00 per year.

e. CSDs marginal tax rate is 32.00%.

f. CSD is 73.00% equity-financed.

g. CSDs 20.00-year, semi-annual pay, 5.04% coupon bond sells for $1,018.00.

h. CSDs stock currently has a market value of $22.35 and Mr. Bensen believes the market estimates that dividends will grow at 4.49% forever. Next years dividend is projected to be $1.79.

Round to 2 decimal places.

Information Stepi WACC Project Life Weight of Equity 58% 7.1838% Cost of Equity 9.22% Weight of Debt 42% Cost of Debt 5.54% (1-Tax rate) 79% a b b Step2 c Initial CF $ 2,040,000 Ending CF $ 428,163.52 $ 178,642 d Direct Cost Saverage value $ 2,040,000 10 $ 178,642 Sunk Cost $ 19,814 Sunk Cost $ 23,201 Incremental Cost $ (492,500) Tax Rate 21% Weight of Equity Weight of Debt 58% 42% Bond Year Bond Coupon Rate Bond Price 15 5.83% $ 1,029 Stock Price Growth Rate Next period Dividend $ $ 24.62 2.96% $ 1.54 Incremental CF $ 492,500 $ 186,135.80 79% (1-tax rate) $ 186,135.80 $ 428,163.52 e $ 2,040,000 $ 606 805.52 t Step3 h 0 $ 1 s 2 $ 3 $ 45 5 $ 6S 75 8 $ 9 $ 10 $ 12.040.0001 428,163.52 428. 163.52 428,163.52 428, 163.52 428,163.52 428,163.52 428,163.52 428,163.52 428,163.52 506,805.52 NPV $ 1,031 119.00 Information Stepi WACC Project Life Weight of Equity 58% 7.1838% Cost of Equity 9.22% Weight of Debt 42% Cost of Debt 5.54% (1-Tax rate) 79% a b b Step2 c Initial CF $ 2,040,000 Ending CF $ 428,163.52 $ 178,642 d Direct Cost Saverage value $ 2,040,000 10 $ 178,642 Sunk Cost $ 19,814 Sunk Cost $ 23,201 Incremental Cost $ (492,500) Tax Rate 21% Weight of Equity Weight of Debt 58% 42% Bond Year Bond Coupon Rate Bond Price 15 5.83% $ 1,029 Stock Price Growth Rate Next period Dividend $ $ 24.62 2.96% $ 1.54 Incremental CF $ 492,500 $ 186,135.80 79% (1-tax rate) $ 186,135.80 $ 428,163.52 e $ 2,040,000 $ 606 805.52 t Step3 h 0 $ 1 s 2 $ 3 $ 45 5 $ 6S 75 8 $ 9 $ 10 $ 12.040.0001 428,163.52 428. 163.52 428,163.52 428, 163.52 428,163.52 428,163.52 428,163.52 428,163.52 428,163.52 506,805.52 NPV $ 1,031 119.00