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Better Mousetraps has developed a new trapit can go into production for an initial investment in equipment of $57 The equipment will be depreciated straight-line
Better Mousetraps has developed a new trapit can go into production for an initial investment in equipment of $57 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 $638,000The firm believes that working capital at each date must be maintained at a level of 15% of next year's forecast salesThe firm estimates production costs equal to $1.70 per trap and believes that the traps can be sold for $8 eachSales forecasts are given in the following table. The project will come to an end in 6 years, when the trap becomes technologically obsoleteThe firm's tax bracket is 35%and the required rate of return on the project is 10% Use the MACRS depreciation schedule Thereafter Year: Sales (millions of traps0.6 a. 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 calculationsEnter your answer in whole dollars not in millions
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