Better 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 6 years, but, in fact, it can be sold after 6 years for $500,000. The firm believes that working capital at each date must be maintained at a level of 10% of next years 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 5 years when the trap becomes technologically obsolete. The firms tax bracket is 40%, and the required rate of return on the project is 12%. Use the MACRS depreciation schedule.

a) What is project NPV?

Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions rounded to 4 decimal places.

b) By how much would NPV increase if the firm uses double-declining-balance depreciation with a later switch to straight-line when remaining project life is only two years?

Note: Do not round intermediate calculations. Enter your answer in millions to the nearest whole dollar amount.

\begin{tabular}{|lccccccccc} \hline Year: & 0 & 1 & 2 & 3 & 4 & 5 & 6 & Thereafter \\ \hline Sales (millions of traps) & 0.00 & 0.50 & 0.60 & 1.00 & 1.00 & 0.60 & 0.20 & 0 \end{tabular}