A chemical plant constructed in 2007 began operating in 2008. In 2010 , the plant is projected to operate at \(90 \%\) of capacity, with

(a) Calculate the return on investment (ROI) in 2010 given that the total depreciable capital is \(\$ 18 \mathrm{MM}\) and the working capital is \(\$ 2 \mathrm{MM}\). Assume straight-line depreciation at \(8 \%\) per year.

(b) Calculate the cash flow in 2010 and discount it to present value assuming an effective interest rate of \(15 \%\). Use the MACRS depreciation schedule for a class life of \(5 \mathrm{yr}\).

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Sales Cost of sales (excl. dep.) $10 MM $ 5 MM