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 3-year project. The plant will cost $9.5 million to build. The plan is to manufacture 11,000 RDSs per year and sell them at $5,800 per machine. The following market data on DEI's securities are current: Debt: 60,000, 6.5 percent coupon bonds outstanding, 5 years to maturity, selling for 95 percent of par value; the bonds have a $1,000 par value each and make semiannual payments. Common stock: 1,250,000 shares outstanding, selling for $97 per share; the beta is 1.15. Preferred stock: 90,000 preferred shares of $4/share dividend preferred stock outstanding, selling for $95 per share. Market: 7 percent market risk premium; 3.8 percent risk-free rate. DEI's tax rate is 34 percent

1. Determine DEI's market value based capital structure
2. Estimate the applicable WACC (including interpretation) for DEI.