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 NPV of the PJX5? (ROUND TO 2 DECIMAL PLACES.) a. The PJX5 will cost $1.83 million fully installed and has a 10 year life. It will be depreciated to a book value of $284,956.00 and sold for that amount in year 10. b. The Engineering Department spent $44,242.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $20,794.00. d. The PJX5 will reduce operating costs by $438,196.00 per year. e. CSD’s marginal tax rate is 27.00%. f. CSD is 63.00% equity-financed. g. CSD’s 16.00-year, semi-annual pay, 5.71% coupon bond sells for $958.00. h. CSD’s stock currently has a market value of $24.35 and Mr. Bensen believes the market estimates that dividends will grow at 2.88% forever. Next year’s dividend is projected to be $1.47.
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
a. The PJX5 will cost $1.83 million fully installed and has a 10 year life. It will be depreciated to a book value of $284,956.00 and sold for that amount in year 10.
b. The Engineering Department spent $44,242.00 researching the various juicers.
c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $20,794.00.
d. The PJX5 will reduce operating costs by $438,196.00 per year.
e. CSD’s marginal tax rate is 27.00%.
f. CSD is 63.00% equity-financed.
g. CSD’s 16.00-year, semi-annual pay, 5.71% coupon bond sells for $958.00.
h. CSD’s stock currently has a market value of $24.35 and Mr. Bensen believes the market estimates that dividends will grow at 2.88% forever. Next year’s dividend is projected to be $1.47.
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