# 2✪Caspian Sea Drinks is considering the purchase of a new water filtrationsystem produced by Rube Goldberg Machines. This new equipment, theRGM-7000, will allow Caspian Sea Drinks to expand production. It willcost $14.00 million fully installed and will be fully depreciated over a15.00 year life, then removed for no cost. The RGM-7000 will result inadditional revenues of $3.03 million per year and increased operatingcosts of $783,283.00 per year. Caspian Sea Drinks' marginal tax rate is26.00%. The incremental cash flows for produced by the RGM-7000 areSubmitAnswer format: Currency: Round to: 2 decimal places.Show HintCaspian Sea Drinks is considering the purchase of a new water filtrationsystem produced by Rube Goldberg Machines. This new equipment, theRGM-7000, will allow Caspian Sea Drinks to expand production. It willcost $13.00 million fully installed and will be fully depreciated over a 15year life, then removed for no cost. The RGM-7000 will result inadditional revenues of $2.96 million per year and increased operatingcosts of $716,526.00 per year. Caspian Sea Drinks' marginal tax rate is22.00%. The internal rate of return for the RGM-7000 isSubmitAnswer format: Percentage Round to: 4 decimal places (Example:9.2434%, % sign required. Will accept decimal format rounded to 6decimal places (ex: 0.092434))

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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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Lukow Products is investigating the purchase of a piece of automated equipment that will save $150,000 each year in direct labor and inventory carrying costs. This equipment costs $800,000 and is expected to have a 5-year useful life with no salvage value. The company’s required rate of return is 12% on all equipment purchases. Management anticipates that this equipment will provide intangible benefits such as greater flexibility and higher-quality output that will result in additional future cash inflows. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the net present value of the piece of equipment before considering its intangible benefits? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. What minimum dollar value per year must be provided by the equipment’s intangible benefits to justify the $800,000 investment? (Do not round intermediate…
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Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $10,500,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,000,000 per year for each of the next 9 years. In year 9 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1.2 million. Thus, in year 9 the investment cash inflow totals $3,200,000. Calculate the project's NPV using a discount rate of 10%. If the discount rate is 10%, then the project's NPV is $____________
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Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,500,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,000,000 per year for each of the next 6 years. In year 6 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1 million. Thus, in year 6 the investment cash inflow totals $3,000,000. Calculate the project's NPV using a discount rate of 7 percent.
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