Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I need help immediately please, before 11:00 p.m. tonight. Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant

I need help immediately please, before 11:00 p.m. tonight.

Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the purchase of the equipment necessary to produce the diet drink will cost $22.00 million. The plant and equipment will be depreciated over 10 years to a book value of $3.00 million, and sold for that amount in year 10. Net working capital will increase by $1.46 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $9.46 million per year and cost $1.68 million per year over the 10-year life of the project. Marketing estimates 19.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 24.00%. The WACC is 11.00%. Find the IRR (internal rate of return).

Please ensure that the answer is correct. My previous question was wrong.

Would you please show all steps and in a simple format, I am just learning. Also, if you are able to show what to enter on the financial calculator I would appreciate it. Thanks.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Trading And Investing

Authors: John Teall

3rd Edition

0323909558, 978-0323909556

More Books

Students also viewed these Finance questions