Suppose you have been hired as a financial consultant to Defense Electronics, Incorporated $($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\mathrm{.}1$ 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

$$7\mathrm{.}64$ million after taxes. In five years, the land will be worth $$7\mathrm{.}94$ million after taxes. The company wants to build its

new manufacturing plant on this land; the plant will cost $$13\mathrm{.}16$ million to build. The following market data on DEl's

securities are current:

DEl's tax rate is $24$ percent. The project requires $$845,000$ in initial net working capital investment to get

operational.

a$.$ Calculate the project's Time $0$ cash flow, taking into account all side effects. Assume that any NWC raised does

not require floatation costs.

Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and

enter your answer in dollars, not millions of dollars, e$.$g$.,1,234,567.$

b$.$ The new RDS project is somewhat riskier than a typical project for DEI, primarily because the plant is being

located overseas. Management has told you to use an adjustment factor of $+1$ percent to account for this

increased riskiness. Calculate the appropriate discount rate to use when evaluating DEl's project.

Note: Do not round intermediate calculations and enter your answer as a percent rounded to $2$ decimal

places, e$.$g$.,32\mathrm{.}16.$

c$.$ The manufacturing plant has an eight$-$year tax life, and DEI uses straight$-$line depreciation. At the end of the

project $($i$.$e$.,$ the end of Year $5),$ the plant can be scrapped for $$1\mathrm{.}54$ million. What is the aftertax salvage value of

this manufacturing plant?

Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e$.$g$.,$

$1,234,567.$

d$.$ The company will incur $$2,340,000$ in annual fixed costs. The plan is to manufacture $13,400$ RDSs per year and

sell them at $$10,800$ per machine; the variable production costs are $$10,000$ per RDS$.$ What is the annual

operating cash flow, OCF, from this project?

Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e$.$g$.,$

$1,234,567.$

e$.$ Calculate the project's net present value.

Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars,

rounded to $2$ decimal places, e$.$g$.,1,234,567\mathrm{.}89$

f$.$ Calculate the project's internal rate of return.

Note: Do not round intermediate calculations and enter your answer as a percent rounded to $2$ decimal

places, e$.$g$.,32\mathrm{.}16.$