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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 $2.05 million fully installed and has a 10 year life. It will be depreciated to a book value of $277,247.00 and sold for that amount in year 10. b. The Engineering Department spent $35,105.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $16,307.00. d. The PJX5 will reduce operating costs by $395,290.00 per year. e. CSDs marginal tax rate is 37.00%. f. CSD is 55.00% equity-financed. g. CSDs 16.00-year, semi-annual pay, 5.43% coupon bond sells for $990.00. h. CSDs stock currently has a market value of $23.22 and Mr. Bensen believes the market estimates that dividends will grow at 2.88% forever. Next years dividend is projected to be $1.79.

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