Atamp;t has developed a new battey phone. The initial investment in equipment is $6.6 million.

At&t has developed a new battey phone. The initial investment in equipment is $6.6 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 $643,000. The company believes that working capital at each date must be maintained at a level of 15% of next year's forecast sales. The company estimates production costs equal to $1.90 per battery and believes that the batteries can be sold for $6 each. Sales forecasts are given in the following table. The project will come to an end in 6 years. The companies tax bracket is 35%, and the required rate of return on the project is 12%.