Koka Kola is evaluating the idea of selling a new drink under its brand for the next 10 years.

a. Koka Kola spent $750,000 on market research regarding a new drink.

b. To start the production of the new drink, Koka Kola needs to purchase new machines and

C.

equipment that will cost $3,500,000 today. These assets will have a residual value of

$1,000,000 after 10 years. Koka Kola uses a straight-line method to depreciate its assets.

The factory that will be used to produce the new drink can create a present value of

$1,200,000 if used otherwise.

d. For the next 10 years, the sales from this project are estimated to be $15,000,000 per year

above what they would be if the project was not accepted.

Production and other costs are estimated to be $10,000,000 per year above what they would

f.

be if the project was not accepted.

The appropriate tax rate for Koka Kola is 40%

8.

h.

The capital of the firm includes 45% of equity and 55% of debts

Cost of equity is 18%, and the before-tax cost of debt is 7%.

31. What is the WACC of the firm?

a. 8.25%

b. 9.06%

c. 10.41%

d. 11.31%

. 12.97%

32. What is the depreciation expense per year created by the project?

a. $160.000

b. $180,000

C. $200.000

d. $250.000

e. $300,000

33. What is the incremental cash flow per year of the project for year 1-9?

a. $3.080.000

b. $3.100.000

C. $3,120.000

d. $3,280,000

e. $3,300,000

34. What is the NPV of the project?

a. $12,975,358

b. $13,280.481

c. $14,388.695

d.

$15,934,383

e.

$16,542,179