After spending $$3$ million on rese arch, Super Mousetraps has developed a new trap. The project requires an initial investment in plant and equipment of $$6$ million. This investment will be depreciated straight$-$line over five years to a value of zero, but when the project terminates in five years, the equipment can in fact be sold for $$500,000.$ The firm believes that working capital at each date must be maintained at $10\%$ of next year$$s forecasted sales. Production costs are estimated at $$1\mathrm{.}50$ per trap and the traps will be sold for $$4$ each. There are no other marketing expenses. Sales forecasts $($in million units$)$ are given in the following table.

Sales Forecasts

Year $012345$

Sales $00\mathrm{.}50\mathrm{.}61\mathrm{.}01\mathrm{.}00\mathrm{.}6$

Part $1$The firm pays tax at $35\%$ rate and the required return on the project is $12\%.$ What is the project$$s NPV$?$ Part $2$Suppose that the price of each trap rises at an annual rate of $2\%,$ and production costs per unit rises by $10\%$ each year. Should the project be accepted?