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 company bought some land three years ago for $7 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 $7.71 million after taxes. In five years, the land will be worth $8.01 million after taxes. The company wants to build its new manufacturing plant on this land; the plant will cost $13.44 million to build. The following market data on DEI’s securities are current:
|Debt:||46,100 6.9 percent coupon bonds outstanding, 21 years to maturity, selling for 93.9 percent of par; the bonds have a $1,000 par value each and make semiannual payments.|
|Common stock:||761,000 shares outstanding, selling for $95.10 per share; the beta is 1.18.|
|Preferred stock:||36,100 shares of 6.25 percent preferred stock outstanding, selling for $93.10 per share.|
|Market:||7.05 percent expected market risk premium; 5.25 percent risk-free rate.|
DEI’s tax rate is 34 percent. The project requires $880,000 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. (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.)
Time 0 cash flow $
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 +1 percent to account for this increased riskiness. Calculate the appropriate discount rate to use when evaluating DEI’s project. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Discount rate %
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 $1.61 million. What is the aftertax salvage value of this manufacturing plant? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
Aftertax salvage value $
The company will incur $2,410,000 in annual fixed costs. The plan is to manufacture 14,100 RDSs per year and sell them at $11,500 per machine; the variable production costs are $10,700 per RDS. What is the annual operating cash flow, OCF, from this project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
Operating cash flow $
Calculate the project’s net present value. (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Net present value $
Calculate the project’s internal rate of return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Internal rate of return %Get Finance homework help today
We aim at 100% customer satisfaction. As such, we never compromise on the quality of our assignment services. Our homework helpers craft each paper carefully to match the requirements on the instruction form.
We receive many applications from writers around the world daily. Nevertheless, we only choose the cream of the crop to tackle your “help with homework” requests. Hence, our homework helpers are highly-qualified individuals who maintain our quality policy.
We maintain a fair pricing policy for all our homework help services. Our pricing system generates quotations based on the requirements of each paper.
At My Homework Writers, we guarantee all students swift delivery of their assignments. We understand that time is an essential factor in the academic world. We, therefore, ensure that all assignments are delivered on or before the agreed deadline.
We maintain a zero-plagiarism policy in all our essay papers. Our assignment writers stick to the students’ instructions to deliver plagiarism-free papers. We are also keen to avoid any chance of similarities with previously written papers.
We understand that you might run into trouble once in a while when working with our system. In the event that you do run into trouble, please get in touch with our support agents and they will immediately provide you with assistance.
Feel free to contact us via the Chat window or email: firstname.lastname@example.org.
Follow these simple steps to get your homework done
Fill in the order form and provide all details of your assignment.
Choose the payment system that suits you most.
You will be able to track the progress of your paper from our system.
Once your paper is ready, we will email it to you.
Myhomeworkwriters website holds a reputation for providing high-quality assignment writing services. You only need to give us all the requirements for your “do my homework” order, and our homework paper writers will give you the best results.
We have highly qualified essay writers to assist you whenever you place in "help with my homework" order. Our essay writing service is designed to help students get good grades.
Our admission essay writing help will assist you to secure a position at your desired learning institution. We will help you craft a top-notch personal statement paper. Our writers who know how to write a college admission essay will help you get the college admission you are longing for.
Our team of professional editors will help you organize your paper, paraphrase it, and eliminate any possible mistakes. Also, we will help you check on plagiarism to ensure that your final paper possesses quality and originality.
My homeworkwriters harbors specialists who can handle your technical papers order. Our “write my homework” services cover all academic areas you can think of. The simplicity or complexity of the paper does not affect the quality of assignment writing services.