Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is...

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Caspian Sea Drinks is considering the purchase of a plum juicer– the PJX5. There is no planned increase in production. The PJX5will reduce costs by squeezing more juice from each plum and doingso in a more efficient manner. Mr. Bensen gave Derek the followinginformation. What is the NPV of the PJX5?
a. The PJX5 will cost $2.08 million fully installed and has a 10year life. It will be depreciated to a book value of $248,744.00and sold for that amount in year 10.
b. The Engineering Department spent $47,451.00 researching thevarious juicers.
c. Portions of the plant floor have been redesigned toaccommodate the juicer at a cost of $23,078.00.
d. The PJX5 will reduce operating costs by $425,909.00 peryear.
e. CSD’s marginal tax rate is 30.00%.
f. CSD is 73.00% equity-financed.
g. CSD’s 16.00-year, semi-annual pay, 5.86% coupon bond sellsfor $1,022.00.
h. CSD’s stock currently has a market value of $21.60 and Mr.Bensen believes the market estimates that dividends will grow at3.89% forever. Next year’s dividend is projected to be $1.61.

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Answer Calculation of WACC Equity Cost of equity Dividend next year Share price Growth rate 161 2160 389 113437 Debt CSDs 1600year semiannual pay 586 coupon bond See Answer

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Caspian Sea Drinks is considering the purchase of a plum juicer– the PJX5. There is no planned increase in production. The PJX5will reduce costs by squeezing more juice from each plum and doingso in a more efficient manner. Mr. Bensen gave Derek the followinginformation. What is the NPV of the PJX5?a. The PJX5 will cost $2.08 million fully installed and has a 10year life. It will be depreciated to a book value of $248,744.00and sold for that amount in year 10.b. The Engineering Department spent $47,451.00 researching thevarious juicers.c. Portions of the plant floor have been redesigned toaccommodate the juicer at a cost of $23,078.00.d. The PJX5 will reduce operating costs by $425,909.00 peryear.e. CSD’s marginal tax rate is 30.00%.f. CSD is 73.00% equity-financed.g. CSD’s 16.00-year, semi-annual pay, 5.86% coupon bond sellsfor $1,022.00.h. CSD’s stock currently has a market value of $21.60 and Mr.Bensen believes the market estimates that dividends will grow at3.89% forever. Next year’s dividend is projected to be $1.61.