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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 $2.00 million fully installed and has a 10 year life. It will be depreciated to a book value of $137,588.00 and sold for that amount in year 10. b. The Engineering Department spent $40,526.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $18,708.00. d. The PJX5 will reduce operating costs by $435,149.00 per year. e. CSD's marginal tax rate is 33.00%. f. CSD is 70.00% equity-financed. g. CSD's 11.00-year, semi-annual pay, 6.24% coupon bond sells for $978.00. h. CSD's stock currently has a market value of $23.14 and Mr. Bensen believes the market estimates that dividends will grow at 4.44% forever. Next year's dividend is projected to be $1.47
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