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 NPV of the PJX5? a. The PJX5 will cost $1.65 million fully installed and has a 10 year life. It will be depreciated to a book value of $130,402.00 and sold for that amount in year 10. b. The Engineering Department spent $23,555.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $18,011.00. d. The PJX5 will reduce operating costs by $445,340.00 per year. e. CSDs marginal tax rate is 28.00%. f. CSD is 57.00% equity-financed. g. CSDs 18.00-year, semi-annual pay, 6.36% coupon bond sells for $982.00. h. CSDs stock currently has a market value of $23.46 and Mr. Bensen believes the market estimates that dividends will grow at 3.67% forever. Next years dividend is projected to be $1.55
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