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Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $ 6 . 3 million .

Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6.3million. The equipment will be depreciated straight-line over 6years to a value of zero, but in fact it can be sold after 6years for $695,000.The firm believes that working capital at each date must be maintained at a level of 10%of next years forecast sales. The firm estimates production costs equal to $1.80per trap and believes that the traps can be sold for $7each. Sales forecasts are given in the following table. The project will come to an end in 6years, when the trap becomes technologically obsolete. The firms tax bracket is 35%,and the required rate of return on the project is 11%

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