4. Return to question Problem 12-16 Accounting measures of performance Use the cash flows and competitive spreads shown in the table below. Ants Year e 150 (5 millions) Year 1 Year 2 Years 3-10 96 Investment Production (millions of pounds per year) Spread (5 per pound) Net revenues Production costs Transport Other costs 1.11 1.11 56 1.11 62.16 46.00 100.56 46.00 e 36 36 36 Cash flow -36 - 19.84 24.56 NPV (at rs9N) = @ Assume the dividend payout ratio each year is 100% a. Calculate the year-by-year book and economic profitability for investment in polyzone production Assume straight-line depreciation over 10 years and a cost of capital of 99 (Negative answers should be indicated by a minus sign. Leave no cells blank - be certain to enter "O" wherever required. Do not round intermediate calculations. Enter your income answers in millions + a. Calculate the year-by-year book and economic profitability for investment in polyzone production Assume straight-line depreciation over 10 years and a cost of capital of 9% (Negative answers should be indicated by a minus sign. Leave no cells blank - be certain to enter "o" wherever required. Do not round intermediate calculations. Enter your income answers in millions rounded to 2 decimal places and enter the rate of return as a percent rounded to 2 decimal places.) 10 points Period 0 1 2 3 Answer is complete but not entirely correct. Book income Book rate of Economic (s in millions) return (%) income ($ in millions) 0 0 46.00 0.25 (34.15) 36.56 (21.33) (25.10 6.64 461 X 14,34 8.64 5.27 15.34 6.64 6.15 03 10.42 6.64 7:38 17.57 6.64 9.223 18.30 6.643 12 30 20.113 6.643 12.30 03 20.11 12 in 2011 4 O 5 6 7 8 9 3 Return 8 9 6.64 6.64 X X X 12.30 X 12.30 x 12.30 X 20.11 X 20.11 X 20.11 10 6.64 X b-1. What is the economic rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to decimal places.) Answer is complete but not entirely correct. Economic rate of retur 7.00 3 b-2. Now compute the steady-state book rate of return (ROI) for a mature company producing polyzone Assume no growth and competitive spreads (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Answer is complete but not entirely correct. ROI 2.77%
