- Caspian Sea Drinks Is Considering The Production Of A Diet Drink The Expansion Of The Plant And The Purchase Of The Equ 1 (36.72 KiB) Viewed 20 times
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 $1.26 million at the beginning of
the project and will be recovered at the end. The new diet drink
will produce revenues of $8.82 million per year and cost $2.29
million per year over the 10-year life of the project. Marketing
estimates 11.00% of the buyers of the diet drink will be people who
will switch from the regular drink. The marginal tax rate is
28.00%. The WACC is 14.00%. Find the NPV (net present value).
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 $1.26 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $8.82 million per year and cost $2.29 million per year over the 10-year life of the project. Marketing estimates 11.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 28.00%. The WACC is 14.00%. Find the NPV (net present value). Submit Answer format: Currency: Round to: 2 decimal places.