24Caspian Sea Drinks is considering the purchase of a plum juicer .docx - 24 Caspian Sea Drinks is considering the purchase of a plum juicer � the

24Caspian Sea Drinks is considering the purchase of a plum juicer .docx

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24 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 IRR of the PJX5? a. The PJX5 will cost $1.88 million fully installed and has a 10 year life. It will be depreciated to a book value of $214,065.00 and sold for that amount in year 10. b. The Engineering Department spent $33,355.00 researching the various juicers. c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $18,443.00. d. The PJX5 will reduce operating costs by $453,490.00 per year. e. CSD s marginal tax rate is 21.00%. f. CSD is 63.00% equity-financed. g. CSD s 17.00-year, semi-annual pay, 5.94% coupon bond sells for $987.00. h. CSD s stock currently has a market value of $23.09 and Mr. Bensen believes the market estimates that dividends will grow at 2.60% forever. Next year s dividend is projected to be $1.77.
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  • Fall '17
  • Bob Maxwell

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