Question

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

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 $2.46 million fully installed and has a 10 year life. It will be depreciated to a book value of $171,635.00 and sold for that amount in year 10.

b. The Engineering Department spent $43,747.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $17,682.00.

d. The PJX5 will reduce operating costs by $412,884.00 per year.

e. CSD’s marginal tax rate is 38.00%.

f. CSD is 56.00% equity-financed.

g. CSD’s 19.00-year, semi-annual pay, 6.20% coupon bond sells for $1,043.00.

h. CSD’s stock currently has a market value of $21.47 and Mr. Bensen believes the market estimates that dividends will grow at 2.22% forever. Next year’s dividend is projected to be $1.71.

With steps if possible thanks

Homework Answers

Answer #1

Cost of portion B will not be considered at all because it is sunk cost and it is irrelevant to take future decision.

Formulas used:-

Depriciation=(P678+P679-P680)/P681

Interest rate=(P678+P679)*0.45*5.24%
Profit before tax=P685-P686-P687
tax= P688 *0.38
Profit after tax=P688-P689
Net Cashflow=P690+P686
IRR=RATE(P681,P691,-P678-P679,P680)

I hope My efforts will be fruitful to you...

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is...
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 $2.20 million fully installed and has a 10 year life. It will be depreciated to a book value of $243,320.00...
Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is...
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 $1.62 million fully installed and has a 10 year life. It will be depreciated to a book value of $120,755.00...
Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is...
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 $2.44 million fully installed and has a 10 year life. It will be depreciated to a book value of $211,609.00...
Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is...
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 $2.34 million fully installed and has a 10 year life. It will be depreciated to a book value of $182,297.00...
Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is...
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 $2.15 million fully installed and has a 10 year life. It will be depreciated to a book value of $200,210.00...
Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is...
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 $1.77 million fully installed and has a 10 year life. It will be depreciated to a book value of $291,334.00...
Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is...
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 $1.70 million fully installed and has a 10 year life. It will be depreciated to a book value of $123,084.00...
Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is...
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 $2.19 million fully installed and has a 10 year life. It will be depreciated to a book value of $118,747.00...
Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is...
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 $1.70 million fully installed and has a 10 year life. It will be depreciated to a book value of $248,619.00...
Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is...
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 $1.67 million fully installed and has a 10 year life. It will be depreciated to a book value of $154,643.00...