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 2.60% forever. Next year’s dividend is projected to be $1.59.
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
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 2.60% forever. Next year’s dividend is projected to be $1.59.
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