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, it 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 bracket is 35%, and the required rate of return on the project is 10%.

Year:012345 6 Thereafter

Sales (millions of traps) 00.50.60.8 0.80.6 0.40

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?(Enter your answer in millions rounded to 4 decimal places.)

The efficiency gains resulting from a just-in-time inventory management system will allow a firm to reduce its level of inventories permanently by $541,000. What is the most the firm should be willing to pay for installing the system?

A house painting business had revenues of $17,900 and expenses of $10,900 last summer. There were no depreciation expenses. However, the business reported the following changes in working capital:

Accounts receivable$3,100 $6,400

Accounts payable 1,080 490

Calculate net cash flow for the business for this period.

Canyon Tours showed the following components of working capital last year:

BeginningEnd of year

Accounts receivable$24,400 $23,200

Inventory 12,200 12,900

Accounts payable 14,700 16,900

a.What was the change in net working capital during the year?(A negative amount should be indicated by a minus sign.)

b.If sales were $36,200 and costs were $24,200, what was cash flow for the year? Ignore taxes.