Question

22.

Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube Goldberg Machines. This new equipment, the RGM-7000, will allow Caspian Sea Drinks to expand production. It will cost $14.00 million fully installed and will be fully depreciated over a 19.00 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $3.20 million per year and increased operating costs of $748,168.00 per year. Caspian Sea Drinks' marginal tax rate is 25.00%. The incremental cash flows for produced by the RGM-7000 are _____. Answer format: Currency: Round to: 2 decimal places.

#2 Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube Goldberg Machines. This new equipment, the RGM-7000, will allow Caspian Sea Drinks to expand production. It will cost $13.00 million fully installed and will be fully depreciated over a 15 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $2.87 million per year and increased operating costs of $740,726.00 per year. Caspian Sea Drinks' marginal tax rate is 23.00%. The internal rate of return for the RGM-7000 is _____.

Answer format: Percentage Round to: 4 decimal places (Example: 9.2434%, % sign required. Will accept decimal format rounded to 6 decimal places (ex: 0.092434))

#3 Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube Goldberg Machines. This new equipment, the RGM-7000, will allow Caspian Sea Drinks to expand production. It will cost $12.00 million fully installed and will be fully depreciated over a 20 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $3.52 million per year and increased operating costs of $619,711.00 per year. Caspian Sea Drinks' marginal tax rate is 24.00%. If Caspian Sea Drinks uses a 9.00% discount rate, then the net present value of the RGM-7000 is _____.

Answer format: Currency: Round to: 2 decimal places.

#4 Assume a par value of $1,000. Caspian Sea plans to issue a 11.00 year, semi-annual pay bond that has a coupon rate of 8.15%. If the yield to maturity for the bond is 7.79%, what will the price of the bond be? Answer format: Currency: Round to: 2 decimal places.

#5 Assume a par value of $1,000. Caspian Sea plans to issue a 13.00 year, semi-annual pay bond that has a coupon rate of 7.81%. If the yield to maturity for the bond is 8.19%, what will the price of the bond be?

Answer 1

- Fax 15 A 1 Solution: B C D F 22 2 7 36842.11 Per year 8 4 Dep per year = 14000000 / 19 5 6 Incremental Cashflows 7 Additional Revenue 9 Less: Operating Cost 10 Less : Dep 11 Income 12 Less : Tax @ 25% 13 Net Income 14 Add: Dep (As Non Cash) 15 Incremental Cashflow 3200000.00 748168.00 736842.10 1714989.90 428747.48 1286242.43 736842.10 2023084.53