Problem 14.30 – Defense Electronics, Inc. (DEI)

Fundamentals of Corporate Finance

Ross, Westerfield, and Jordan

13th Edition

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Defense Electronics, Inc. needs to evaluate a manufacturing plant to produce a new line of RDSs. Given market data on DEI's securities including its Debt, Common Stock, Preferred stock, and the Market, along with the underwriter's fees (spreads), determine the initial cash flow, the discount rate adjusted for increased riskiness, the aftertax salvage value of the plant when sold, the annual operating cash flow, the accounting break-even quantity of RDSs and finally, the project's NPV and IRR.

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