Suppose you have been hired as a financial consultant to Raytheon Company (RTX), 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. You need to advise them whether to take the project or not. Calculate the Payback Period, NPV, and IRR for the project and determine whether they should take the project or not. 1. The company bought some land three years ago for $6 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 $4.5 million. 2. In five years, the value of the land will be $4.9 million. 3. The plant and equipment will cost $19.37 million to build. 4. The manufacturing plant has a 30-year tax life, and RTX uses straight-line depreciation. At the end of the project, the plant and equipment can be scrapped for $10 million. 5. The project requires $4,000,000 in initial net working capital investment to get operational 6. The plan is to manufacture 15.000 RDSs in the first year and sell them at $10,400 per machine. The following 4 years, the number to be produced grows by 15%, 20%, 25%, and 25% annually, i.e. year over year. The price of the RDS will rise by 5% per year. 7. The company will incur $7.900,000 in annual fixed costs, and the variable production costs are $9,000 per RDS in the first year. The following 4 years, variable production costs will grow at a rate of 5%, 3%, 2%, and 29 annually, i.e. year over year. 8. RTX's tax rate is 21 percent. 9. The following market data on RTX's securities is current: Debt: 222,000, 5.6 percent coupon bonds are outstanding. 15 years to maturity, selling for 97.36 percent of par: the bonds have a S1,000 par value each and make semiannual payments. Common: 8.000,000 shares outstanding, selling for $82.81 per share; you have stock prices and S&P 500 index value for the past five years. Preferred: 442,000 shares of 5 percent preferred stock outstanding, selling for $103.76 per share and having a par value of $100. Market: 7 percent expected market risk premium; 3 percent risk-free rate. You will need to estimate RTX's beta using the data in the data file. To do so, you need to convert the prices to returns and then use the Excel slope command. Date RTX S&P 5/1/2016 56.07634 2,096.95 6/1/2016 57.5543 2,098.86 7/1/2016 60.41658 2.173.60 8/1/2016 59.73187 2.170.95 9/1/2016 57.36799 2.168.27 10/1/2016 57.70678 2.126.15 11/1/2016 60.82361 2.198.81 12/1/2016 62.27816 2,23883 1/1/2017 62.30656 2.278.87 2/1/2017 63.94279 2.363.64 3/1/2017 64. 12897 2.362.72 4/1/2017 68.00379 2,384 20 5/1/2017 69.31255 2,411.80 6/1/2017 70.16838 2.423.41 7/1/2017 68.13419 2.470.30 8/1/2017 68.79503 2,471.65 9/1/2017 67.10844 2,519.35 10/1/2017 69.23590 2,575.26 11/1/2017 70.21297 2.647.58 12/1/2017 74.19282 2,673.61 1/1/2018 80.26458 2,823.81 2/1/2018 78.36278 2,713.83 3/1/2018 73.58158 2,640.87 4/1/2018 70.26567 2,648.05 5/1/2018 72.99676 2,705.27 6/1/2018 73.53207 2.718.37 7/1/2018 79.8308 2.816.29 8/1/2016 77.4548 2.901.52 9/1/2018 82.66363 2.913.98 10/1/2018 73.44002 2.711.74 11/1/2018 72.03873 2.760.17 12/1/2018 63.31809 2,506.85 1/1/2019 70.21007 2,704.10 2/1/2019 74.7294 2.784.49 3/1/2019 77.09961 2,834.40 4/1/2019 85.30667 2.945.83 5/1/2019 75.55033 2,752 06 6/1/2019 78.31285 2,941.76 7/1/2019 80.35789 2.980.38 8/1/2019 78.33691 2,926.45 9/1/2019 82.60266 2.976.74 10/1/2019 86.87437 3,037.56 11/1/2019 89.75445 3.140.98 12/1/2019 91.06494 3,230.78 1/1/2020 91.3325 3,225.52 2/1/2020 79.4082 2.954.22 3/1/2020 57.63245 2,584.59 4/1/2020 62.91919 2,912.43 5/1/2020 62.63766 3,044.31 6/1/2020 60.35217 3.100 29 7/1/2020 S5.5138 3.271.12 8/1/2020 59.74492 3,500.31 9/1/2020 56.77559 3,363.00 10/1/2020 53.59837 3.269.96 11/1/2020 70.76721 3,62163 12/1/2020 21.07268 3.756.07 1/1/2020 91.3325 3,225.52 2/1/2020 79.4082 2,954.22 3/1/2020 57.63245 2,584.59 4/1/2020 62.91919 2,912.43 5/1/2020 62.63766 3,044.31 6/1/2020 60.35217 3,100.29 7/1/2020 55.5138 3,271.12 8/1/2020 59.74492 3,500.31 9/1/2020 56.77559 3,363.00 10/1/2020 53.59837 3,269.96 11/1/2020 70.76721 3,621.63 12/1/2020 71.07268 3,756.07 1/1/2021 66.32191 3,714.24 2/1/2021 71.54974 3,811.15 3/1/2021 77.27 3,972.89 4/1/2021 82.81 4,186.72