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

a. Calculate the project's initial Time 0 cash flow, taking into account all side effects. Assume that net working capital will not require flotation costs.

b. The new RDS project is riskier. Management has told you to use an adjustment factornof +3 percent to account for this increased riskiness. Calculate the appropriate discount rate to use when evaluating DEI's project.

c. Plant has an 8 year tax life, and uses straight line depreciation. At end of year 5, plant amd equipment can be scrapped for 3.9 million. What is the aftertax salvage value of plant and equipment?

d. Company will incur 6,200,000 in annual fixed costs. Plan is to manufacture 14,000 RDSs per year and sell them at $10,500 per machine; variable production cost are $9100.00 per RDS. What is the annual operating cash flow from this project?

e. DEI's comptroller is primarily interested in thenimpact of DEIs 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? Break-even quantity in units?

f. DEIs president wants you to throw all calcualtions, assumptions, everything into the report for the CFO. He wants to know what the projects IRR and NPV are. Assume net working capital will not require flotation costs.

IRR=

NPV=

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 $3.9 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. The land was appraised last week for $47 million. In five years, the aftertax value of the land will be $51 million, but the company expects to keep the land for a future project. The company wants to build its new manufacturing plant on this land, the plant and equipment will cost $3152 million to build. The following market data on DEI's securities is current Debt: 224,000 7.4 percent coupon bonds outstanding, 25 years to maturity, selling for 109 percent of par; the bonds have a $1,800 par value each and make semiannual payments. 8,200,000 shares outstanding, selling for $70.40 per share; the beta is 1.2. Common stock: Preferred stock: 444,000 shares of 4 percent preferred stock outstanding, selling for $80.40 per share and and having a par value of $180. Market: 6 percent expected market risk premium; 4 percent risk-free rate. DEl uses G.M. Wharton as its lead underwriter. Wharton charges Del spreads of 9 percent on new common stock issues, 7 percent on new preferred stock issues, and 5 percent on new debt issues. Wharton has included all direct and indirect issuance costs (along with its 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. Del's tax rate is 38 percent. The project requires $1150,000 in initial networking capital investment to get operational. Assume Wharton raises all equity for new projects externally. a. Calculate the project's initial Time O cash flow, taking into account all side effects. Assume that the networking capital will not require 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 flow $1