Please do not use Excel to solve this question.

4. DWY is a large publicly traded firm that is the market share leader in radar detection systems. The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. The following market data on Hua Chuang's securities are current: Debt: 45,000 6.8 percent coupon bonds outstanding, 20 years to maturity, selling for 95 percent of par; the bonds have a $1000 par value each and make semiannual payments. Common stock: 750,000 shares outstanding, selling for $94 per share; the beta is 1.2. Preferred stock: 35,000 shares of 6.2 percent preferred stock outstanding, selling for $92 per share. Market: 8 percent expected market risk premium; 5.20 percent risk-free rate. DEI's tax rate is 34 percent. The new RDS project is somewhat riskier than a typical project for Hua Chuang, primarily because the plant is being located overseas. Management has told you to use an adjustment factor of +2 percent to account for this increased riskiness. Calculate the appropriate discount rate to use when evaluating Hua Chuang's project. (20 marks)