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M LACHE C y Started http:/owconnect.mheducation.com/flow/connect.html Chapter 9 Homework Saved Check my work mode : This shows what is correct or Incorrect for the work you have completed so far, It does not Indicate completion. 9 Amturn to question 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 $584,000, 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 citimates points production costs equal to $1.30 per trap and belleves 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 fin's tax bracket is 35%, and the required rate of return on the project is 10%. Use the MACRS depreciation schedule Thereafter Salon (millions of traps) 0.6 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.) Answer is complete but not entirely correct. NPV $ 3.0907 million b. By how much would NPV increase if the firm depreciated its Investment using the 5-year MACRS schedule? [Do not round Intarmarlista calculations Enter your answer In wehala dalian not In millions i es.mhhe.com/connect/0OF7640748/MACAS depreciation schedule.png Recovery Period Class Your(s) 3 Your 6 Your 7 Your 10 Year 15 Year 20 Your 33.33 20.00 14.29 10.00 5.00 3.75 44.45 32.00 24.49 18,00 9.50 7.22 14.81 19.20 17.49 14.40 8.55 6.68 7.41 11.52 12.49 11.52 7.70 6.18 11.52 8.93 9.22k 6.03 5.71 5,76 8.92 7.37 6.23 5.28 8.93 6.55 5,90 4.89 4.46 6.55 5.90 4 52 6.56 5.91 4.46 6.55 5.90 4.46 3.28 5.91 4.46 12 5.90 4.46 13 5.91 4.46 14 5.90 4.46 15 5,91 4.46 16 2.95 4 46 17-20 4.46 21 2.23 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