Question: USE THE INFORMATION BELOW TO ANSWER THE FOLLOWING TWO ( 2 ) QUESTIONS Orange Monster Drinks is considering the purchase of a plum juicer the
USE THE INFORMATION BELOW TO ANSWER THE FOLLOWING TWO QUESTIONS
Orange Monster Drinks is considering the purchase of a plum juicer the Moment Maid. The company is
provided with the following information.
The juicer will cost $ fully installed, and has a year life. It will be depreciated to a
book value of $ and sold for that amount in year
The new juicer will generate $ in sales each year for the next years.
Because of the expansion, operating costs will increase by $ per year.
The company will increase net working capital by $ at the beginning of the project; this
amount will be recovered at the end of the life of the project.
The Engineering department spent $ researching the various juicers.
Last month, portions of the plant floor were redesigned to accommodate the juicer. The cost of
this modification was $ The company that did the work sent Orange Monster Drinks an
invoice last week; Orange Monster Drinks plans to pay the $ tomorrow.
Orange Monster Drinks marginal tax rate is
Orange Monster Drinks is equityfinanced and debt financed.
Orange Monster Drinksyears remaining to maturity, semiannual payment, coupon bonds
sell for $
Orange Monster Drinks stock currently has a market value of $ and the company believes
the market estimates that dividends will grow at forever. Next years dividend is projected
to be $
The WACC of the Orange Monster Drinks is
What is the NPV of this project?
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