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 (2) 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 $4,725,000, fully installed, and has a 15-year life. It will be depreciated to a
book value of $450,000 and sold for that amount in year 15.
* The new juicer will generate $960,000 in sales each year for the next 15 years.
* Because of the expansion, operating costs will increase by $300,000 per year.
* The company will increase net working capital by $90,000 at the beginning of the project; this
amount will be recovered at the end of the life of the project.
* The Engineering department spent $45,000 researching the various juicers.
* Last month, portions of the plant floor were redesigned to accommodate the juicer. The cost of
this modification was $175,000. The company that did the work sent Orange Monster Drinks an
invoice last week; Orange Monster Drinks plans to pay the $175,000 tomorrow.
* Orange Monster Drinks marginal tax rate is 32%.
* Orange Monster Drinks is 45% equity-financed and 55% debt financed.
* Orange Monster Drinks25-years remaining to maturity, semi-annual payment, 6% coupon bonds
sell for $916.00.
* Orange Monster Drinks stock currently has a market value of $20.00 and the company believes
the market estimates that dividends will grow at 2.75% forever. Next years dividend is projected
to be $1.68.
42. The WACC of the Orange Monster Drinks is ___%.
43. What is the NPV of this project?

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