Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant...

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Caspian Sea Drinks is considering the production of a dietdrink. The expansion of the plant and the purchase of the equipmentnecessary to produce the diet drink will cost $24.00 million. Theplant and equipment will be depreciated over 10 years to a bookvalue of $3.00 million, and sold for that amount in year 10. Networking capital will increase by $1.28 million at the beginning ofthe project and will be recovered at the end. The new diet drinkwill produce revenues of $8.75 million per year and cost $1.51million per year over the 10-year life of the project. Marketingestimates 11.00% of the buyers of the diet drink will be people whowill switch from the regular drink. The marginal tax rate is31.00%. The WACC is 10.00%. Find the NPV (net present value).

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Initial cost cost of machine net working capital 24 m128m 258m Depreciation costbook valuenoof years 24m3m10 21m per year annual cash flow revenue See Answer

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Caspian Sea Drinks is considering the production of a dietdrink. The expansion of the plant and the purchase of the equipmentnecessary to produce the diet drink will cost $24.00 million. Theplant and equipment will be depreciated over 10 years to a bookvalue of $3.00 million, and sold for that amount in year 10. Networking capital will increase by $1.28 million at the beginning ofthe project and will be recovered at the end. The new diet drinkwill produce revenues of $8.75 million per year and cost $1.51million per year over the 10-year life of the project. Marketingestimates 11.00% of the buyers of the diet drink will be people whowill switch from the regular drink. The marginal tax rate is31.00%. The WACC is 10.00%. Find the NPV (net present value).