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 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 $7.79 million after taxes. In five years, the land will be worth $8.09 million after taxes. The company wants to build its new manufacturing plant on this land; the plant will cost $13.76 million to build. The following market data on DEI's securities are current: Debt: Common stock: 93,800 7.2 percent coupon bonds outstanding, 26 years to maturity, selling for 93.1 percent of par; the bonds have a $1,000 par value each and make semiannual payments. 1,860,000 shares outstanding, selling for $95.90 per share; the beta is 1.10. Preferred stock: 88,000 shares of 6.4 percent preferred stock outstanding, selling for $93.90 per share. Market: 7.15 percent expected market risk premium; 5.1 percent risk-free rate. DEI's tax rate is 24 percent. The project requires $920,000 in initial net working capital investment to get operational.