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-financed. 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 3.09% forever. Next year's dividend is projected to be $1.67. Submit 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 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-financed. 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 3.09% forever. Next year's dividend is projected to be $1.67. Submit 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))

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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Gold Star Industries is contemplating a purchase of computers. The firm has narrowed its choices to the SAL 5000 and the HAL 1000. The company would need nine SALs, and each SAL costs $3,250 and requires $300 of maintenance each year. At the end of the computer’s eight-year life, each one could be sold for $195. Alternatively, the company could buy seven HALs. Each HAL costs $3,600 and requires $355 of maintenance every year. Each HAL lasts for six years and has a resale value of $140 at the end of its economic life. The company will continue to purchase the model that it chooses today into perpetuity, and the tax rate is 25 percent. Assume that the maintenance costs occur at year-end. Depreciation is straight-line to zero. What is the EAC of each model if the appropriate discount rate is 12 percent? (Your answers should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Please answer fast i give you upvote.
Whispering Winds Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $56,525. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,500. At the end of eight years, the company will sell the truck for an estimated $27,600. Traditionally, the company has used a general rule that it should not accept a proposal unless it has a payback period that is less than 50% of the asset's estimated useful life. William Davis, a new manager, has suggested that the company should not rely only on the payback approach but should also use the net present value method when evaluating new projects. The company's cost of capital is 8%. (a) Calculate the cash payback period and net present value of the proposed investment. (If the net present value is negative, use either a…
Waterway Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company’s current truck (not the least of which is that it runs). The new truck would cost $57,000. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $7,500. At the end of 8 years, the company will sell the truck for an estimated $28,100. Traditionally the company has used a rule of thumb that a proposal should not be accepted unless it has a payback period that is less than 50% of the asset’s estimated useful life. Larry Newton, a new manager, has suggested that the company should not rely solely on the payback approach, but should also employ the net present value method when evaluating new projects. The company’s cost of capital is 8%. Compute the cash payback period and net present value of the proposed investment. (If the net present value is negative, use either a negative sign…
please asnwer correctly: Your company has been approached to bid on a contract to sell 5,000 voice recognition (VR) computer keyboards per year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $3.4 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $395,000 to be returned at the end of the project, and the equipment can be sold for $325,000 at the end of production. Fixed costs are $595,000 per year, and variable costs are $85 per unit. In addition to the contract, you feel your company can sell 12,300, 14,600, 19,200, and 11,600 additional units to companies in other countries over the next four years, respectively, at a price of $180. This price is fixed. The tax rate is 23 percent, and the required return is 10 percent. Additionally, the president of the company…
The CFO of The Fun Factory is investigating the possibility of investing in a three-dimensional printer that would cost $16,500. The printer would eliminate the need to have prototypes of new toys be produced by a third party. The cost of having the prototypes manufactured by the third party is about $7,161 per year. The printer would have a useful life of five years with no salvage value with expected annual operating costs of $3,300 per year. Required: Compute the simple rate of return on the printer. (Round your answer to 1 decimal place.) Simple rate of return %
Pharoah Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $56,640. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,000. At the end of eight years, the company will sell the truck for an estimated $27,700. Traditionally, the company has used a general rule that it should not accept a proposal unless it has a payback period that is less than 50% of the asset's estimated useful life. Brian Walker, a new manager. has suggested that the company should not rely only on the payback approach but should also use the net present value method when evaluating new projects. The company's cost of capital is 8%. Calculate the cash payback period and net present value of the proposed investment. (If the net present value is negative, use either a negative sign…

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