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 35%, and the required rate of return on the project is 10%. Use the MACRS depreciation schedule. Year: Sales (millions of traps) a. What is project NPV? 1 0.5 2 3 0.7 0.8 4 0.8 5 0.6 6 0.5 Thereafter 0 Note: Do not round intermediate calculations. Enter your answer in millions rounded to 4 decimal places. NPV million b. By how much would NPV increase if the firm uses double-declining-balance depreciated 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 whole dollars not in millions. The NPV increases by Recovery Period Class Year(s) 3 Year 5 Year 7 Year 10 Year 15 Year 20 Year 1 33.33 20.00 14.29 10.00 5.00 3.75 2 44.45 32.00 24.49 18.00 9.50 7.22 3 14.81 19.20 17.49 14.40 8.55 6.68 4 7.41 11.52 12.49 11.52 7.70 6.18 5 11.52 8.93 9.22 6.93 5.71 6 5.76 8.92 7.37 6.23 5.28 7 8.93 6.55 5.90 4.89 8 4.46 6.55 5.90 4.52 9 6.56 5.91 4.46 10 6.55 5.90 4.46 11 3.28 5.91 4.46 12 5.90 4.46 13 5.91 4.46 14 5.90 4.46 15 5.91 4.46 16 2.95 4.46 17-20 21 4.46 2.23 Notes: 1. Tax depreciation is lower in the first year because assets are assumed to be in services for 6 months. 2. Real property is depreciation stright-line over 27.5 years for residential property and 39 years for nonresidential property.