Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $5.4 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 $527,000. 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 9%. Use the MACRS depreciation schedule Year: Thereafter Sales (millions of traps) 1 0.5 2 0.7 3 0. 9 4 .9 5 0.6 6 0.4 0 a. What is project NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions rounded to 4 decimal places.) NPV 1 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 Year(s) 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 15 Year 5.00 9.50 8.55 7.70 6.93 AW NOOOOOOWN- 20 Year 3.75 7.22 6.68 6.18 5.71 5.28 4.89 4.52 4.46 4.46 3.28 6.23 5.90 5.90 5.91 5.90 5.91 5.90 5.91 5.90 5.91 2.95 4.46 15 16 17-20 4.46 4.46 4.46 4.46 4.46 4.46 2.23 21 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 39 years for nonresidential property