PS 32 #2

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 IRR of the PJX5?

a. The PJX5 will cost $2.31 million fully installed and has a 10 year life. It will be depreciated to a book value of $240,369.00 and sold for that amount in year 10.

b. The Engineering Department spent $47,860.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $22,552.00.

d. The PJX5 will reduce operating costs by $418,469.00 per year.

e. CSDs marginal tax rate is 23.00%.

f. CSD is 66.00% equity-financed.

g. CSDs 19.00-year, semi-annual pay, 5.37% coupon bond sells for $1,037.00.

h. CSDs stock currently has a market value of $20.09 and Mr. Bensen believes the market estimates that dividends will grow at 2.49% forever. Next years dividend is projected to be $1.63.

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Answer format: Percentage Round to: 2 decimal places (Example: 9.24%, % sign required. Will accept decimal format rounded to 4 decimal places (ex: 0.0924))