Find the net present value for caspian sea drinks

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Problem 1: 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 $23.00 million. The plant and equipment will be depreciated over 10 years to a book value of $2.00 million, and sold for that amount in year 10. Net working capital will increase by $1.11 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $8.81 million per year and cost $1.97 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 20.00%. The WACC is 13.00%. Find the NPV (net present value).

Reference no: EM132812547

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