Given:
Cash outflow for the year 0:
Cost of Machine $1,530,000 + Research cost $36,028 + Redesigning cost $19,398 =$1585426
Yearly Cash inflow in the form of savings in operating cost $439312
Marginal Tax Rate = 24%
Equity financed = 67% ; Balance debt financed = 33%
Calculation of Cost of capital for discounting purpose:
Cost of Equity = Div1/P+g = 1.49/21.34+0.0409 = 0.0698+0.0409 = 0.1107= 11.07%
Cost of Bond = (I + [RV - SV] / n) / (RV + SV) / 2
I= (1000*6.19%*2) =$123.80 ; RV=$1000; SV=$991
= (123.80+(1000-991)/20)/(1000+991)/2 = 124.25/995.5 = 0.1248 AFTER tax = 0.1248(1-0.24) = 0.0949 = 9.49%
WACC= 67%(0.1107)+33%(0.0949) = 0.0742+0.0313 = 0.1055= 10.55%
Calculation on NPV of the PJX5:
NPV = Present value of Cash inflow - Present value of Cash out flow
Calculation of Cash flow after tax = $439312(1-0.24) = $333877.12
Year | CFAT |
PV Factor @ 10.55% |
Present Value |
0 | -1585426.00 | 1 | -1585426.00 |
1-10 | 333877.12 | 6 | 2003940.55 |
10 (sale value) | 206022.00 | 0.37 | 75565.95 |
Total (NPV) | 494080.50 |
NPV of the PJX5 = $494080.50
Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is...
p24.) 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 $2.30 million fully installed and has a 10 year life. It will be depreciated to a book value of...
1. 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 $1.63 million fully installed and has a 10 year life. It will be depreciated to a book value of...
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 $2.42 million fully installed and has a 10 year life. It will be depreciated to a book value of $260,148.00...
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 $1.82 million fully installed and has a 10 year life. It will be depreciated to a book value of $103,248.00...
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 $1.70 million fully installed and has a 10 year life. It will be depreciated to a book value of $298,764.00...
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 $1.91 million fully installed and has a 10 year life. It will be depreciated to a book value of $150,589.00...
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 $1.71 million fully installed and has a 10 year life. It will be depreciated to a book value of $285,571.00...
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 $1.54 million fully installed and has a 10 year life. It will be depreciated to a book value of $146,595.00...
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 $2.29 million fully installed and has a 10 year life. It will be depreciated to a book value of $129,164.00...
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 PJXS? a. The PJX5 will cost $1.66 million fully installed and has a 10 year life. It will be depreciated to a book value of $250,198.00...