Suppose you have been hired as a financial consultant to Defense Electronics. Incorporated (DET, a large, publicly traded firm that is the market share leader in rador detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This wil be a five-year project. The company bought some land three years ago for $4.1 miliion 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 $4.9 million on an aftertax basis. In five years, the aftertax value of the land will be $5.3 million, but the company propects to keep the land for a future project. The company wants to build its new manufacturing piant on this land; the plant and equipment will cost $31.68 million to buid. The following market data on DEr's securities is current Debt. 113,0007 percent coupon bonds outstanding, 23 years to maturity, selling for 107 percent of par, the bonds have a par value of $2,000 and make semiannual payments. Common 8,400,000 shares outstanding, selling for $70.60 per share; the beta is stock: 13 Preferred 446.000 shares of 5.6 percent preferred stock outstanding. selling for stock $80.60 per share; the stock has a par value of $100. Market. 6 percent expected market risk premium; 4.5 percent risk-free rate. Del uses G.M. Wharton as its lead underwitec. Whaton charges. DEl spreads of 6.5 percent on new common stock issues, 5.5 percent on new preferred stock issues, and 4.5 percent on now debt issues. Wharton has included all direct and indirect issuance costs folong with its profit in setting these spreads. Wharton has recommended to DEI that it raise the funds needed to build the plant by issuing new shares of common stock Der's tax rato is 24 percent. The projoct requires $1,200,000 in initial net working capital nvestment to get operational. Assume Wharton roses all equity for new projects paternally. a. Calculato the project's initial Year 0 cash flow, taking into account all side effects, Assume that the net working capital will not require flotation costs. (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, rounded to the nearest whole number, e.g., 1,234,567.) b. The new RDS project is somowhat riskier than a typical project for DEI, primarily because the plant is being located overseas. Manogement has told you to use ar adjustment factor of 1 percent to account for this increased riskiness. Calculate. the approprlate discount rate to use when evaluating DEi's project. (Do not rounc intermediate calculations and enter your answer as a percent rounded to 2 decima places, e.g., 32.16.) c. The manufacturing plant has an eight-year tax life, and DEl uses straight-line depreciation. At the end of the project (that is, the end of Year 5) the plant and equipment can be scropped for $4.1 million. What is the aftertax salvage value of this plant and equipment? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) d. The company will incur $6,400,000 in annual foxed costs. The plan is to manufacture 15,000 ROSs per year and sell them at $10,600 per machine; the variable production costs are $9,200 per RDS. What is the annual operating cash flow. (OCF) from this project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e,9, 1,234,567.). e. DEi's comptroller is primarily interested in the impoct of DEI's investments on the bottom line of reported accounting statements. What will you tell her is the accounting break-even quantity of RDSs sold for this project? (Do not round intermediote calculations and round your answer to the nearest whole number, .g,32. ) f. Finally, DEI's president wants you to throw all your calculations, assumptions, and everything else into the report for the chief financial officer; all he wants to know is What the RDS proyect's internal rate of return (IRR) and net present value (NPV) are. (Do not round intermediate calculations, Enter your NPV answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567,89. Enter your IRR answer as a percent rounded to 2 decimal places, e.g., 32.16.)