Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (), a large, publicly traded firm that is the marke leader in radar detection systems (RDSS)The company is looking at setting up a manufacturing plant overseas to produce a new line of This will be a five-year projectThe company bought some land three years ago for $4.3 million in anticipation 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 $5.1 millionIn five years, the aftertax value of the land will be $million, but the company expects to keep the land for a future project. The company wants to build its new manufacturing plant on this landthe plant and equipment will cost $31.84 million to build. The following market data on securities is current Debt 7.2 percent coupon bonds outstanding , 25 years to maturity selling for percent of pary the bonds have a par value each and make semiannual payments . stock: shares outstanding, selling for $78.80 per share ; the beta is 1.1. Preferred stock 448,890 shares of 5 percent preferred stock outstanding, selling for per share and and having a par value of $. Market percent expected market risk premium; 5 percent risk-free rate. DEI G.M. Wharton as its lead underwriter . Wharton charges DEI spreads of 8 percent on new common stock issues, 6 percent on new preferred stock issues , and 4 percent on new debt issues Wharton has included all direct and Indirect Issuance costs (along with profit ) in setting these spreads. Wharton has recommended to DEl that it raise the funds needed to build the plant by issuing new shares of common stock tax rate is 35 percent. The project requires \$1,250,000 In networking capital investment to get operational Assume Wharton ralses all equity for new projects externally Calculate the project's initial Time cash flow, taking into account all side effects . Assume that the networking capital will not flotation costs . (A negative answer should be indicated by a minus sign . Do not round intermediate calculations . Enter your answer in dollars, not millions of dollars, e.g., 1,234,567 .) Cash $

c. The manufacturing plant has an eight-year tax life, and DEI uses straight-line depreciation. At the end of the project (that is, the end of Year 5), the plant and equipment can be scrapped for $4.3 million. What is the aftertax salvage value of this plant and equipment? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) Aftertax salvage value $ 7754000 d. The company will incur $6,600,000 in annual fixed costs. The plan is to manufacture 16,000 RDSs per year and sell them at $10,700 per machine; the variable production costs are $9,300 per RDS. What is the annual operating cash flow (OCF) from this project? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) Operating cash flow $ 1166300( e. DEl's comptroller is primarily interested in the impact of DEl'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 intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Break-even quantity units 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 project's internal rate of return (IRR) and net present value (NPV) are. Assume that the net working capital will not require flotation costs. (Enter your NPV answer in dollars, not millions of dollars, e.g., places, e.g., 32.16.) 1,234,567. Enter your IRR answer as a percent. Do not round intermediate calculations and round your answers to 2 decimal IRR % NPV