How much will this increase project npv

Assignment Help Financial Accounting

Reference no: EM133560770

Question: 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 $536,000. 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 $1.10 per trap and believes that the traps can be sold for $5 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 40%, and the required rate of return on the project is 10%.

Suppose the firm can cut its requirements for working capital in half by using better inventory control systems. By how much will this increase project NPV ?

Reference no: EM133560770

Questions Cloud

Major public health journal : Pick a major public health journal and read its table of contents for the last three issues

Discuss some factors or events that could lead : Discuss some factors or events that could lead to a positive net income but negative cash flow from operations. Explain any concerns that you might have

What year did the mormons practice polygamy : What Year did the mormons practice polygamy? During the Freedom and Slavery in the New World-Slavery, what 4 things occured?

How is apple making this connection : How is Apple making this connection in their scorecard. How did they arrive at these two metrics to drive their business? How does this all align to strategic

How much will this increase project npv : Suppose the firm can cut its requirements for working capital in half by using better inventory control systems. By how much will this increase project NPV

Integrate evidence-based interventions : Integrate evidence-based interventions in your plan and summary of the scenario

What is a potential disadvantage of using technology : What is a potential disadvantage of using technology in the interview process? Technology can fill vacant positions faster than other means Technology decreases

Conditions at agency or practice setting : Explain any differences between the conditions of the study and the conditions at the agency or practice setting.

Why is it important for individuals and firms to understand : Which would you choose, assuming you can handle either payment, and why? Why is it important for individuals and firms to understand opportunity cost

User Account

All Pages