So i have this question:
After spending 3 million on research, Better Mousetraps has developed a new trap. The project requires an initial investment in plant and equipment of 6 million. This investment will be depreciated straight line over 5 years to a value of zero, but when the project comes to an end in 5 years the equipment can , in fact, be sold for 500,000. The firm believes that working capital at each date must be maintained at 10% of the next years forecasted sales. Production costs are estimated at 1.50 per trap and the traps will be sold for 4 each. Sales forecasted are given in the following table. The firm pays tax at 35% and the required rate of return on the project is 12%. What is the NPV?
The only thing i do not understand in this calculation is why , under year 5 in the table, in the capital investment row, it says that the capital investment is 325. Where is this number coming from ? Thanks!