Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6.3 million.
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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. 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 $694,000. The firm believes that working 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 $2.00 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%.


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