Suppose you have been hired as a financial consultant to Defense Electronics, Incorporated (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 five-year project. The company bought some land three years ago for $7.3 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. If the land were sold today, the net proceeds would be $7.77 million after taxes. In five years, the land will be worth $8.07 million after taxes. The company wants to build its new manufacturing plant on this land; the plant will cost $13.68 million to build. The following market data on DEIs securities are current:

Debt:	93,400 7 percent coupon bonds outstanding, 24 years to maturity, selling for 93.3 percent of par; the bonds have a $1,000 par value each and make semiannual payments.
Common stock:	1,820,000 shares outstanding, selling for $95.70 per share; the beta is 1.12.
Preferred stock:	86,000 shares of 6.3 percent preferred stock outstanding, selling for $93.70 per share.
Market:	7.05 percent expected market risk premium; 4.95 percent risk-free rate.

DEIs tax rate is 22 percent. The project requires $910,000 in initial net working capital investment to get operational.

a) Calculate the projects Time 0 cash flow, taking into account all side effects. Assume that any NWC raised does not require floatation costs.

Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.

b) The new RDS project is somewhat riskier than a typical project for DEI, 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 DEIs project.

Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

c)The manufacturing plant has an eight-year tax life, and DEI uses straight-line depreciation. At the end of the project (i.e., the end of Year 5), the plant can be scrapped for $1.67 million. What is the aftertax salvage value of this manufacturing plant?

Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.

d) The company will incur $2,470,000 in annual fixed costs. The plan is to manufacture 14,700 RDSs per year and sell them at $12,100 per machine; the variable production costs are $11,300 per RDS. What is the annual operating cash flow, OCF, from this project?

Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.

e) Calculate the project's net present value.

Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89

f) Calculate the project's internal rate of return.

1. time 0 cashflow

2. discount rate

3. aftertax salvage value

4. operating cash flow

5. NRV

6. IRR