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 compsony bought some tand three years ago for $$4\mathrm{.}9$ million in anticipation of

using it as a toxic dump site for waste chemicals, but it bult a piping system to safely discard the chemicals instead. If the land were

sold today, the net proceeds would be $$57$ million after taxes. In five years, the land will be worth $$6\mathrm{.}4$ million after taxes. The

company wants to bulld its new manufacturing plant on this land, the plant will cost $$257$ million to build. The following market data on

DEl's securities are current:

Debt $70,0005\mathrm{.}8$ percent coupon bonds outstanding. $25$ years to maturity, selling for $98$ percent of par, the bonds have a $$1,000$ par

value each and make semiannual payments.

Common stock $1,450,000$ shares outstanding selling for $$97$ per share, the beta is $110.$

Preferred stock: $90000$ shares of $5\mathrm{.}4$ percent preferred stock outstanding. par value of $$100,$ selling for $$95$ per share

Market: $7$ percent expected market risk premium, $3\mathrm{.}8$ percent risk$-$free rate.

DEl's tax rate is $25$ percent. The project requires $$925,000$ in initial net working capital investment to get operational

$-.$ Calculate the projects Time $0$ cash flow, taking into account all side effects. Assume that any NWC raised does not require flotation

costs.

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

dollars, not millionfi of dollars, rounded to the nearest whole number, e$.$g$.,1,234,567.$

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

Management has told you to use an adjustment factor of $+2$ percent to account for this increased riskiness. Calculate the appropriate

discount rate to use when evaluating DErs 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 $($ie$.$ the end of

Year $5),$ the plant can be scrapped for $$3\mathrm{.}5$ miltion. 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, rounded to the nearest

whole number, e$.$g$.,1,234,567.$

d$.$ The company will incur $$3\mathrm{.}8$ million in annual fixed costs. The plan is to manufacture $13,500$ ROSs per year and sell them at $$11,200$

per machine, the variable production costs are $$10,100$ per ROS. What is the annual operating cash flow, OCF, from this project?

Note: Do not round intermediate calculations and enter vour answer in dollars. not millions of dollars. rounded to the neareste$-1.$ Calculate the 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$.,1,234,567\mathrm{.}89.$

e$-2.$ Calculate the internal rate of return.

Note: Do not round intermediate calculations and enter your answer as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.$