What is project npv of better mousetraps

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Better mousetraps has developed a new trap. it can go into production for an initial investment in equipment of $5.7 million. the equipment will be depreciated straight line over 6 years to a value of zero, but in fact can be sold after 6 years for $638,000. The firm believes that working capital at each date must be maintained at a level of 15% of next year's forecast sales. the firm estimates production costs equal to $1.70 per trap and believes that the traps can be sold for $8 each. Sales forecasts are given in the following table. The project will come to an end in 6 years, when the trap becomes technologically obsolete. The firm's tax brackets is 35%, and the required rate of return on the project is 10%.

Problem 1: What is project NPV

Reference no: EM132917426

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