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 $7.2 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 $7.69 million after taxes. In five years, the land will be worth $7.99 million after taxes. The company wants to build its new manufacturing plant on this land; the plant will cost $13.36 million to build. The following market data on DEI's securities are current:

Debt:	91,800 7.2 percent coupon bonds outstanding, 26 years to maturity, selling for 94.1 percent of par; the bonds have a $1,000 par value each and make semiannual payments.
Common stock:	1,660,000 shares outstanding, selling for $94.90 per share; the beta is 1.29.
Preferred stock:	78,000 shares of 6.4 percent preferred stock outstanding, selling for $92.90 per share.
Market:	7.05 percent expected market risk premium; 4.9 percent risk-free rate.

DEI's tax rate is 24 percent. The project requires $870,000 in initial net working capital investment to get operational.

• 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.
• 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 +3 percent to account for this increased riskiness. Calculate the appropriate discount rate to use when evaluating DEI's project. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
• 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 $1.59 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.
• The company will incur $2,390,000 in annual fixed costs. The plan is to manufacture 13,900 RDSs per year and sell them at $11,300 per machine; the variable production costs are $10,500 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.
• 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., 1,234,567.89
• 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., 32.16.