Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $5.7 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 $671,000. 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 $1.80 per trap and believes that the traps can be sold for $7 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 firms tax bracket is 35%, and the required rate of return on the project is 8%. Use the MACRS depreciation schedule.

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. a. What is project NPV? Note: 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 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: 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. a. What is project NPV? Note: 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 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