#1Caspian Sea Drinks is considering the purchase of a plum juicer - the PJX5. There is noplanned increase in production. The PJX5 will reduce costs by squeezing more juice fromeach plum and doing so in a more efficient manner. Mr. Bensen gave Derek the followinginformation. What is the NPV of the PJX5?a. The PJX5 will cost $2.45 million fully installed and has a 10 year life. It will bedepreciated to a book value of $267,003.00 and sold for that amount in year 10.b. The Engineering Department spent $30,417.00 researching the various juicers.c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of$22,769.00.d. The PJX5 will reduce operating costs by $451,005.00 per year.e. CSD's marginal tax rate is 23.00%.f. CSD is 61.00% equity-financed.g. CSD's 13.00-year, semi-annual pay, 5.00% coupon bond sells for $978.00.h. CSD's stock currently has a market value of $20.16 and Mr. Bensen believes the marketestimates that dividends will grow at 2.58% forever. Next year's dividend is projected to be$1.71.Submit

Given information:a. Initial Cost of PJX5 = $2.45 millionb. Depreciated Book Value in Year 10 =…

Answered: #1 Caspian Sea Drinks is considering…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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#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 $1.76 million fully installed and has a 10 year life. It will be depreciated to a book value of $119,465.00 and sold for that amount in year 10. b. The Engineering Department spent $16,973.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $19,208.00. d. The PJX5 will reduce operating costs by $343,070.00 per year. e. CSD’s marginal tax rate is 24.00%. f. CSD is 65.00% equity-financed. g. CSD’s 19.00-year, semi-annual pay, 6.11% coupon bond sells for $976.00. h. CSD’s stock currently has a market value of $20.64 and Mr. Bensen believes the market estimates that dividends will grow…
#39 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 $2.32 million fully installed and has a 10 year life. It will be depreciated to a book value of $223,927.00 and sold for that amount in year 10. b. The Engineering Department spent $29,992.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $20,688.00. d. The PJX5 will reduce operating costs by $481,420.00 per year. e. CSD's marginal tax rate is 36.00%. f. CSD is 67.00% equity inanced. g. CSD's 10.00-year, semi-annual pay, 5.05% coupon bond sells for $1,026.00. h. CSD's stock currently has a market value of $23.65 and Mr. Bensen believes the market estimates that dividends will grow at…
12 O 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 $2.48 million fully installed and has a 10 year life. It will be depreciated to a book value of $176,612.00 and sold for that amount in year 10 b. The Engineering Department spent $15,056.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $21,040.00 d. The PJX5 will reduce operating costs by $489,341.00 per year e CSD's marginal tax rate is 22.00% 1. CSD is 75.00% equity-financed 9 CSD's 14 00-year, semi-annual pay, 6.38% coupon bond sells for $1,045,00 h. CSD's stock currently has a market value of $21.80 and Mr. Bensen believes the market estimates that dividends will grow at 4 27%…
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? a. The PJX5 will cost $1.58 million fully installed and has a 10 year life. It will be depreciated to a book value of $107,984.00 and sold for that amount in year 10. b. The Engineering Department spent $30, 114.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $18,576.00. d. The PJX5 will reduce operating costs by $ 310,028.00 per year. e. CSD's marginal tax rate is 20.00%. f. CSD is 66.00% equity - financed. g. CSD's 14.00-year, semi-annual pay, 6.84% coupon bond sells for $1,032.00. h. CSD's stock currently has a market value of $22.92 and Mr. Bensen believes the market estimates that dividends will grow at…
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? a. The PJX5 will cost $2.46 million fully installed and has a 10 year life. It will be depreciated to a book value of $197,632.00 and sold for that amount in year 10. b. The Engineering Department spent $29,074.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $15,768.00. d. The PJX5 will reduce operating costs by $448,114.00 per year. e. CSD’s marginal tax rate is 21.00%. f. CSD is 60.00% equity-financed. g. CSD’s 10.00-year, semi-annual pay, 6.16% coupon bond sells for $1,014.00. h. CSD’s stock currently has a market value of $23.47 and Mr. Bensen believes the market estimates that dividends will grow at…
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 $1.97 million fully installed and has a 10 year life. It will be depreciated to a book value of $173,984.00 and sold for that amount in year 10. b. The Engineering Department spent $49,587.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $15,509.00. d. The PJX5 will reduce operating costs by $430,356.00 per year. e. CSD’s marginal tax rate is 26.00%. f. CSD is 66.00% equity-financed. g. CSD’s 19.00-year, semi-annual pay, 5.73% coupon bond sells for $1,031.00. h. CSD’s stock currently has a market value of $20.05 and Mr. Bensen believes the market estimates that dividends will grow at…
1. Austin's cell phone manufacturer wants to upgrade their product mix to encompass an exciting new feature on their cell phone. This would require a new high-tech machine. You are excited about his new project and are recommending the purchase to your board of directors. Here is the information you have compiled to complete this recommendation: Unit selling price Unit variable cost Fixed Costs Depreciation costs Expected sales $45, $25, $200,000, $35,000, 10,000 units per year According to the information, the project will last 10 years and require an initial investment of $800,000, depreciated with straight-line over the life of the project until the final value is zero. The firm's tax rate is 30% and the required rate of return is 12%. You believe that the variable cost and sales volume may be as much as 10% higher or lower than the initial estimate. Your boss understands the risks but asks you to explain the alternatives in a brief memo to the board. Write a memo to the Board of…
3. We produce and sell stereo speakers. We build the wood frame, manufacture the speaker component, and assemble the unit. We are considering buying the speaker component from Sparkle Speakers. Here is our expected cost of manufacturing the speaker component for next year: Variable Manufacturing Costs per component Direct Materials Direct Labor Variable Manufacturing Costs per batch Setup, materials handling, quality control Fixed Manufacturing Costs Avoidable if we purchase speaker component Unavoidable $ 200 60 1,500 300,000 750,000 We plan to manufacture and sell 8,000 speakers next year. We produce the components in batches of 200 units; therefore, we will have 8,000/200 = 40 batch setups. If we purchase the components from Sparkle Speakers, our purchase cost will be $300 per component. Our current production facility would be idle (i.e. no opportunity cost). a. On the basis of financial consideration, should we continue to manufacture the speaker component or should we purchase…
Y2
not use ai please
15. Project NPV (S6.3) A widget manufacturer currently produces 200,000 units a year. It buys widget lids from an Page 176 outside supplier at a price of $2 a lid. The plant manager believes that it would be cheaper to make these lids rather than buy them. Direct production costs are estimated to be only $1.50 a lid. The necessary machinery would cost $150,000 and would last 10 years. This investment could be written off immediately for tax purposes. The plant manager estimates that the operation would require additional working capital of $30,000 but argues that this sum can be ignored since it is recoverable at the end of the 10 years. If the company pays tax at a rate of 21% and the opportunity cost of capital is 15%, would you support the plant manager's proposal? State clearly any additional assumptions that you need to make.
3

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