Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help, my answer is 0.9267 is it right? Better Mousetraps has developed a new trap. It can go into production for an initlal investment

image text in transcribed

please help, my answer is 0.9267 is it right?

Better Mousetraps has developed a new trap. It can go into production for an initlal investment in equipment of $6 million. The equipment will be depreclated stralght-line over 5 years to a value of zero, but in fact it can be sold after 5 years for $500,000. The firm belleves that working capital at each date must be maintained at a level of 10% of next year's forecast sales. The firm estlmates production costs equal to $1.50 per trap and belleves that the traps can be sold for $4 each. Sales forecasts are given in the following table. The project will come to an end in 5 years, when the trap becomes technologically obsolete. The firm's tax bracket is 35%, and the required rate of return on the project is 12% What is project NPV? (Round your answer to 4 decimal places. Enter your answer in millions of dollars. Use the minus slgn for negative value.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Real Estate Finance

Authors: Wolfgang Breuer, Claudia Nadler

2012th Edition

3834934496, 978-3834934499

More Books

Students also viewed these Finance questions

Question

Find two isomorphism's between R16 and M44.

Answered: 1 week ago