Question
Orange Monster Drinks is considering the purchase of a plum juicer the Moment Maid. The company is provided with the following information. Orange Monster Drinks
Orange Monster Drinks is considering the purchase of a plum juicer the Moment Maid. The company is provided with the following information. Orange Monster Drinks is considering the purchase of a plum juicer the Moment Maid. The company is provided with the following information.
The juicer will cost $4,825,000, fully installed, and has a 15-year life. It will be depreciated to a book value of $400,000 and sold for that amount in year 15.
The new juicer will generate $950,000 in sales each year for the next 15 years.
Because of the expansion, operating costs will increase by $300,000 per year.
The company will increase net working capital by $70,000 at the beginning of the project; this amount will be recovered at the end of the life of the project.
The Engineering department spent $45,000 researching the various juicers.
Last month, portions of the plant floor were redesigned to accommodate the juicer. The cost of this modification was $175,000. The company that did the work sent Orange Monster Drinks an invoice last week; Orange Monster Drinks plans to pay the $175,000 tomorrow.
Orange Monster Drinks marginal tax rate is 30%.
Orange Monster Drinks is 55% equity-financed and 45% debt financed.
Orange Monster Drinks 25-years remaining to maturity, semi-annual payment, 6% coupon bonds sell for $916.00.
Orange Monster Drinks stock currently has a market value of $20.00 and the company believes the market estimates that dividends will grow at 2.75% forever. Next years dividend is projected to be $1.68. 41. The IRR of the project is ______%. 42. The WACC of the Orange Monster Drinks is _______%. 43. The NPV of the project is $_______.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started