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Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $ 5 . 4 million. The
Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $ million. The equipment will be depreciated straight line over years to a value of zero, but in fact it can be sold after years for $ The firm believes that working capital at each date must be maintained at a level of of next years forecast sales. The firm estimates production costs equal to $ per trap and believes that the traps can be sold for $ each. Sales forecasts are given in the following table. The project will come to an end in years, when the trap becomes technologically obsolete. The firms tax bracket is and the required rate of return on the project is Use the MACRS depreciation schedule.
Year: Thereafter
Sales millions of traps
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 decimal places.
By how much would NPV increase if the firm depreciated its investment using the year MACRS schedule?
Note: Do not round intermediate calculations. Enter your answer in whole dollars not in millions.
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