Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $$5\mathrm{.}4$ million. The equipment will be depreciated straight$-$line over $6$ years to a value of zero, but in fact it can be sold after $6$ years for $$682,000.$ 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\mathrm{.}30$ 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 $8\%.$ Use the MACRS depreciation schedule.

Year: $0123456$ Thereafter

Sales $($millions of traps$)00\mathrm{.}50\mathrm{.}70\mathrm{.}80\mathrm{.}80\mathrm{.}70\mathrm{.}50$

What is project NPV$?$

Note: Do not round intermediate calculations. Enter your answer in millions rounded to $4$ decimal places.

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.Better Mousetraps has developed a new trap. It can go into production for an initial investment in

equipment of $$5\mathrm{.}4$ 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 $$682,000.$ 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 $$1\mathrm{.}30$ per trap and believes that the traps can be sold for $$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 $8\%.$ Use the MACRS depreciation schedule.

Year:

Sales $($millions of traps$)$

a$.$ What is project NPV$?$

Note: Do not round intermediate calculations. Enter your answer in millions rounded to $4$

decimal places.

$\backslash$table$[[$NPV$,$$$,3\mathrm{.}6143,$million$]]$

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.Notes:

Tax depreciation is lower in the first year because assets are assumed to be in services for $6$ months.

Real property is depreciation stright$-$line over $27\mathrm{.}5$ years for residential property and $39$ years for nonresidential property.