#4 Caspian Sea Drinks is considering the production of a diet drink. The expansion of the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
#4 Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the purchase of the equipment necessary to produce the diet drink will cost $24.00 million. The plant and equipment will be depreciated over 10 years to a book value of $1.00 million, and sold for that amount in year 10. Net working capital will increase by $1.24 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $9.03 million per year and cost $1.57 million per year over the 10-year life of the project. Marketing estimates 14.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 32.00%. The WACC is 14.00%. Find the IRR (internal rate of return). Submit #4 Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the purchase of the equipment necessary to produce the diet drink will cost $24.00 million. The plant and equipment will be depreciated over 10 years to a book value of $1.00 million, and sold for that amount in year 10. Net working capital will increase by $1.24 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $9.03 million per year and cost $1.57 million per year over the 10-year life of the project. Marketing estimates 14.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 32.00%. The WACC is 14.00%. Find the IRR (internal rate of return). Submit
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
The economic environment of our country currently does not lend itself to being able to successfully run capital campaigns. In a two page document, research and identify 2 successfully capital...
-
The T accounts below summarize the ledger of Simon Landscaping Company at the end of the first month of operations. Instructions(a) Prepare the complete general journal (including explanations) from...
-
Joe Brown and Chris White are forming a partnership to develop a theme park near Panama City, Florida. Brown invests cash of \(\$ 1\) million and land valued at \(\$ 10\) million. When Brown...
-
What is the difference between a holding-company plan and an operating-company plan?
-
Product mix, constrained resource Westford Company produces three products, A110, B382 and D657. Unit data for the three products follows: All three products use the same direct material, Bistide....
-
About what percent of the world's wealth is controlled by the U.S. and Europe? a-More than half b-About 20% c-About 26% d-90%
-
Using the following Profit decision tree, Calculate EVSI knowing EV at equals 180 and EV at node 5 equals 170
-
Le manfuacturing makes products that sell for 1 0 0 per unti . The company incurs variable manufuctuting cost of 4 0 Per unit , variable selling expenses are 1 0 per unit total annual fixed coast are...
-
a. Market for Widgets: (Units Demanded) q = 1,000,000-100,000*p 2 Revenue = p*q Cost structure: Fixed Costs: = $400,000 Variable costs = $1*q Total Costs = $400,000+$1*q What is the profit maximizing...
-
Determine the factor of safety for the part shown in the figure. The element material is 1035 CD steel. The diameter of the piece is 12 mm. Use the theory of distortion energy...
-
2. A project has seven activities. Partial crashing is available. Normal Crash Normal Time Cost Time (weeks) ($) (weeks) 4 3,000 3 9 5,000 7 4 7,000 4 6 6,000 4 8 4,000 3 4,000 4 2,000 Activity A B C...
-
Possible impacts of climate change on transport and how CO2 emissions could be reduced from the freight transport sector. Can climate change block international maritime traffic?
-
On October 1, 20X1, Numi Corp. sold inventory in exchange for a 2-year non-interest- bearing note have a face value of $20,000. The present value of the note on the date of issuance has already been...
-
An annual report of The Campbell Soup Company reported on its income statement $2.4 million as equity in earnings of affiliates. Journalize the entry that Campbell would have made to record this...
-
Mull plc acquired shares in two companies as follows: Skye Ltd Ordinary shares - 8 million acquired on 1 June 1996 for \( 4.50\) each. Preference shares - \( 5000008 \%\) redeemable preference shares...
-
You are the accountant responsible for the Rag group consolidation. The profit and loss accounts of Rag plc, Tag Ltd and Bobtail Ltd for the year ended 31 March 1999 are given opposite....
-
The balance sheets of A plc and its investee companies B Ltd and D Ltd, and of B Ltd's investee company C Ltd at 31 March 1998 (the accounting date for all four companies) are given below: 1....
Study smarter with the SolutionInn App