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. The company is looking at setting up a manufacturing plant overseas to produce a new line of radars. This will be a five year project. The company bought some land three years ago for $6 million. If the land were sold today, the net proceeds would be $7.4 million. The company wants to built the new manufacturing plant on this land. The plant will cost $8.8 million to build. The following market data on DEIs securities are:

Debt 15,000 8 percent coupon bonds outstanding, 20 years to maturity, selling for 96 percent of par; the bonds have a $1000 par value each and make semi annual payments. Preferen 20,000 shares of 6 percent preference shares, selling ce for $78 per shares Shares: Ordinar 300,000 shares outstanding, selling for $68 per share; the beta is 1.25 Shares: Market: 7.5 percent expected market risk premium, 5.2 percent risk free rate