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

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Finance

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 $2.42 million fully installed and has a 10 year life. It will be depreciated to a book value of $241,051.00 and sold for that amount in year 10.

b. The Engineering Department spent $19,649.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $24,429.00.

d. The PJX5 will reduce operating costs by $352,412.00 per year.

e. CSDs marginal tax rate is 21.00%.

f. CSD is 60.00% equity-financed.

g. CSDs 15.00-year, semi-annual pay, 6.08% coupon bond sells for $971.00.

h. CSDs stock currently has a market value of $23.38 and Mr. Bensen believes the market estimates that dividends will grow at 2.21% forever. Next years dividend is projected to be $1.74.

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