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 5-year project. The company bought some land three years ago for $7.3 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 $7.5 million. In five years, the aftertax value of the land will be $7.9 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 $55 million to build. The following market data on DEI's securities is current: Debt: 130,000 6.1 percent coupon bonds outstanding, 25 years to maturity, selling for 104 percent of par; the bonds have a par value of $2,000 and make semiannual payments. Common stock: 9,900,000 shares outstanding, selling for $68 per share: the beta is 1.20. Preferred stock: 400,000 shares of 4.20 percent preferred stock outstanding, selling for $87 per share and having a par value of $100. Market: 7 percent expected market risk premium: 3.1 percent risk-free rate. DEI uses G.M. Wharton as its lead underwriter. Wharton charges DEI spreads of 6.5 percent on new common stock issues, 4.5 percent on new preferred stock issues, and 3 percent on new debt issues. Wharton has included all direct and indirect issuance costs