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Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant...

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 $28.00 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 $1.16 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $9.49 million per year and cost $2.40 million per year over the 10-year life of the project. Marketing estimates 17.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 29.00%. The WACC is 10.00%. Find the IRR (internal rate of return).

answer rounded to 6 decimal places please. Thanks

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Expert Solution

The same with Excel Formulas shown:

The Internal rate of return is 11.913124%

jeff jeffy answered 1 year ago
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