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 $7.2 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 $7.67 million after taxes. In five years, the land will be worth $7.97 million after taxes. The company wants to build its new manufacturing plant on this land; the plant will cost $13.28 million to build. The following market data on DEI's securities are current: Debt: Common stock: 91,400 7 percent coupon bonds outstanding, 24 years to maturity, selling for 94.3 percent of par; the bonds have a $1,000 par value each and make semiannual payments. 1,620,000 shares outstanding, selling for $94.70 per share; the beta is 1.27. Preferred stock: 76,000 shares of 6.3 percent preferred stock outstanding, selling for $92.70 per share. Market: 6.9 percent expected market risk premium; 5.2 percent risk-free rate. DEI's tax rate is 22 percent. The project requires $860,000 in initial net working capital investment to get operational.