Question: I need help immediately please, before 11:00 p.m. tonight. Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant

I need help immediately please, before 11:00 p.m. tonight.

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 $22.00 million. The plant and equipment will be depreciated over 10 years to a book value of $3.00 million, and sold for that amount in year 10. Net working capital will increase by $1.46 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $9.46 million per year and cost $1.68 million per year over the 10-year life of the project. Marketing estimates 19.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 24.00%. The WACC is 11.00%. Find the IRR (internal rate of return).

Please ensure that the answer is correct. My previous question was wrong.

Would you please show all steps and in a simple format, I am just learning. Also, if you are able to show what to enter on the financial calculator I would appreciate it. Thanks.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!