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 at 2.41% forever. Next year’s dividend is projected to be $1.64. 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))
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 $1.76 million fully installed and has a 10 year life. It will be
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 at 2.41% forever. Next year’s dividend is projected to be $1.64.
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))
Step by step
Solved in 3 steps with 2 images
