Question
You are the financial manager of Heinz Kraft Ketchup Inc and you consider buying a new packaging machine to meet the pandemic induced demand increase
You are the financial manager of Heinz Kraft Ketchup Inc and you consider buying a new packaging machine to meet the pandemic induced demand increase for single serve Ketchup packets. The machine requires an initial outlay of $116M and you expect that they generate cashflows of $57M at the end of each year for 10 years. The company has a market value of equity of $46.5B, a market value of debt of $24.5B, an equity beta of 1.05 and bond beta of 0.20. The risk-free rate is 3% and the return on the market portfolio is 10% per year. The corporate tax rate is 21%. What is the net present value of the Ketchup machine? Enter your answer in million dollars rounded to 2 decimals (if you get $123,456,789.0, then enter 123.46). Please show all work.
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