Project Evaluation This is a comprehensive project evaluation problem bringing

together much of what you have learned in this and previous chapters. Suppose you

have been hired as a financial consultant to Defense Electronics, Inc. $($DEI$),$ a large,

publicly traded firm that is the market share leader in radar detection systems $($RDSs$).$

The company is looking at setting up a manufacturing plant overseas to produce a

new line of RDSs$.$ This will be a $5-$year project. The company bought some land

three years ago for $$7\mathrm{.}3$ million in anticipation of using it as a toxic dump site for waste

chemicals, but it built a piping system to safely discard the chemicals instead. The land

was appraised last week for $$7\mathrm{.}5$ million. In five years, the aftertax value of the land

will be $$7\mathrm{.}9$ million, but the company expects to keep the land for a future project. The

company wants to build its new manufacturing plant on this land; the plant and equip$-$

ment will cost $$55$ million to build. The following market data on DEI's securities is

current: