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Problem 12-16 Accounting measures of performance Use the cash flows and competitive spreads shown in the table below. ($ millions) Year 1 Year 2 Years 3-10 Year o 170 1.02 Investment Production (millions of pounds per year) Spread ($ per pound) Net revenues Production costs Transport other costs 1.02 0 0 47 1.02 47.94 37.00 0 27 87 1.02 88.74 37.00 0 27 0 0 0 27 Cash flow -170 -27 -16.06 24.74 NPV (at r = 10%) = 0 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 10%. (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.) Answer is complete but not entirely correct. Period Book income ($ in millions) Book rate of return (%) Economic income ($ in millions) 0 0 0 0 1 (41.00) X (33.06) 2 (24.12) X (19.45) X 4.55 X 4.55 3 7.74 4 7.74 5 7.74 4.55 (41.12) X (50.06) X (9.26) X (9.26) X (9.26) X (9.26) X (9.26) X (9.26) X (9.26) X (9.26) X 6 7.74 4.55 7 7.74 7.74 4.55 X 4.55 8 9 7.74 4.55 x x 10 7.74 4.55 b-1. What is the economic rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Economic rate of return % 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.) ROI % Problem 12-16 Accounting measures of performance Use the cash flows and competitive spreads shown in the table below. ($ millions) Year 1 Year 2 Years 3-10 Year o 170 1.02 Investment Production (millions of pounds per year) Spread ($ per pound) Net revenues Production costs Transport other costs 1.02 0 0 47 1.02 47.94 37.00 0 27 87 1.02 88.74 37.00 0 27 0 0 0 27 Cash flow -170 -27 -16.06 24.74 NPV (at r = 10%) = 0 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 10%. (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.) Answer is complete but not entirely correct. Period Book income ($ in millions) Book rate of return (%) Economic income ($ in millions) 0 0 0 0 1 (41.00) X (33.06) 2 (24.12) X (19.45) X 4.55 X 4.55 3 7.74 4 7.74 5 7.74 4.55 (41.12) X (50.06) X (9.26) X (9.26) X (9.26) X (9.26) X (9.26) X (9.26) X (9.26) X (9.26) X 6 7.74 4.55 7 7.74 7.74 4.55 X 4.55 8 9 7.74 4.55 x x 10 7.74 4.55 b-1. What is the economic rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Economic rate of return % 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.) ROI %