Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $13.2 million. The equipment will be depreciated straight line over 6 years, but, in fact, it can be sold after 6 years for $694,000. The firm believes that working capital at each date must be maintained at a level of 20% of next years forecast sales. The firm estimates production costs equal to $4.50 per trap and believes that the traps can be sold for $10 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 firms tax bracket is 40%, and the required rate of return on the project is 12%. Year 0 1 2 3 4 5 6 Thereafter Sales (millions of traps 0.00 0.56 0.85 1.00 1.00 0.54 0.20 0 a) What is project NPV? b) By how much would NPV increase if the firm takes immediate 100% bonus depreciation? Please show all the intermediate calculations as we did in class. Better Mousetraps from Assignment 2 wants to consider some what if scenarios. In all cases assume straight line depreciation. a) Perform a sensitivity analysis for the following variables: Initial investment, number of sales (for all years), cost per unit, and working capital (as percent of next year sales). Assume what would happen if the estimates double or halved (so if one variable was for example 100, do for 200 and 50), do a tornado diagram and based on that explain which variables affect more NPV and therefore its estimates are more important. b) Perform a scenario analysis when you consider the best-case scenario and worst-case scenario based on the variables from part a)