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Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6 million. The equipment will be
Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6 million. The equipment will be depreciated straight-line over 6 years but, in fact, it can be sold after 6 years for $500,000. The firm believes that vorking 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 $1.50 per trap and believes that the traps can be sold for $4 each. Sales forecasts are given in the following table. The project vill come to an end in 5 years, when the trap becomes technologically obsolete. The firm's tax bracket is 40%, and the required rate of eturn on the project is 12%. Suppose the firm can cut its requirements for working capital in half by using better inventory control systems. By how much will this ncrease project NPV? Note: Do not round your intermediate calculations. Enter your answer in millions rounded to 4 decimal places
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