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

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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 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$2.46 million fully installed and has a 10 year life. It will bedepreciated to a book value of $159,660.00 and sold for that amountin year 10. b. The Engineering Department spent $41,963.00researching the various juicers. c. Portions of the plant floorhave been redesigned to accommodate the juicer at a cost of$15,704.00. d. The PJX5 will reduce operating costs by $306,909.00per year. e. CSD’s marginal tax rate is 30.00%. f. CSD is 56.00%equity-financed. g. CSD’s 18.00-year, semi-annual pay, 5.76% couponbond sells for $980.00. h. CSD’s stock currently has a market valueof $22.20 and Mr. Bensen believes the market estimates thatdividends will grow at 2.43% forever. Next year’s dividend isprojected to be $1.57.

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