Bettet Mousetraps has developed a new trap. It can go into production for an initial...
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Bettet Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $57 million The equipment will be depreciated straight-line over 6 years, but in fact, it can be sold after 6 years for $671000. The firm believes that working capital at each date must be maintained at a level of 10% of next year's forecast sales. The firm estimates production costs equal to 5180 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 bracket is 40% and the required rate of return on the project is 11% Yen: 12 Thereafter Sales (llions of traps) 0 0.4 0.5 0.7 0.2 0.5 0. Suppose the firm can cut its requirements for working capital in half by using better inventory control systems By how much will this increase project NPV? (Do not round your intermediate calculations. Enter your answer in millions rounded to 4 decimal places.) Change in NPV milion
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