Project Evaluation. Beller Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6 million. The equipment will be depreciated straight-line over 5 years to a value of 7.ero, but in fact it can be sold after 5 years for $500.000. The firm believes that working capital at each date must be maintained at a level of 10 percent of next year”s forecast sales. The firm estimates production costs equal to $ 1.50 per trap and believes 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 years, when the trap becomes technologically obsoleted. The firm “S tax bracket is 35 percent, and the required rate of return on the project is 12 percent.
What is project NPV?
| Year | 0 | 1 | 2 | 3 | 4 | 5 | Thereafter |
| Sales(millions of traps) | 0 | .5 | .6 | 1.0 | 1.0 | .6 | 0 |
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