Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6.3 million. T 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 $695,000 firm believes that working capital at each date must be maintained at a level of 10% of next year's forecast sales. The firm estim production costs equal to $1.80 per trap and believes that the traps can be sold for $7 each. Sales forecasts are given in the fa table. The project will come to an end in 6 years, when the trap becomes technologically obsolete. The firm's tax bracket is 35" the required rate of return on the project is 11%. Use the MACRS depreciation schedule. Year: 23 Thereafter Sales (millions of traps) 0.6 0.8 0.9 4 6 0.2 0.5 a. What is project NPV? (Negative amount should be indicated by a minus sign. Do not round Intermediate calculations. Ente answer in millions rounded to 4 decimal places.) NPV million b. By how much would NPV increase if the firm depreciated its investment using the 5-year MACRS schedule? (Do not round intermediate calculations. Enter your answer in whole dollars not in millions.) The NPV increases by 3 Year 33.33 44.45 14.81 7.41 5 Year 20.00 32.00 19.20 11.52 11.52 5.76 Recovery Period Class 7 Year 10 Year 14.29 10.00 24.49 18.00 17.49 14.40 12.49 11.52 8.93 9.22 8.92 7.37 8.93 6.55 4.46 6.55 6.56 6.55 3.28 Year(s) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17-20 21 15 Year 5.00 9.50 8.55 7.70 6.93 6.23 5.90 5.90 5.8 20 Year 3.75 7.22 6.68 6.18 5.71 5.28 4.89 4.52 4.46 4.46 4.46 4.46 4.46 4.46 4.46 4.46 4.46 2.23 5.8 5. 5.90 5.91 5.90 5.91 2.95 Notes: 1. Tax depreciation is lower in the first year because assets are assumed to be in service for 6 months 2. Real property is depreciated straight-line over 27.5 years for residential property and 30 years for nonresidential property