Homework 10 - Fall 2008 Engineering 120 Industrial...

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Unformatted text preview: Fall 2008 Engineering 120 Industrial Engineering & Operations Research November 26, 2008 Page 1 of 2 Homework 10 1. This is a comprehensive project evaluation problem bringing together much of what you have learned in this course. 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 5-year project. The company bought some land three years ago for $8 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. The land was appraised last week for $10.2 million. The company wants to build its new manufacturing plant in this land; the plant will cost $30 million to build. The following market data on DEIs securities are current: Debt: 25,000 7 percent coupon bonds outstanding, 15 years to maturity, selling for 92 percent of par; the...
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This note was uploaded on 06/15/2009 for the course ENGIN 120 taught by Professor Ilan during the Fall '08 term at University of California, Berkeley.

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Homework 10 - Fall 2008 Engineering 120 Industrial...

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