Problem 11-12 Economic rents

Consider the following information given below:

	Year 0			Year 1			Year 2			Year 3			Year 4			Year 5-10
Investment		100
Required rate of return		8%
Production, millions of pounds per year		0			0			42			84			84			84
Spread, $ per pound		1.22			1.22			1.22			1.22			1.12			0.97
Production costs		0			0			32			32			32			32
Transport		0			0			6			10			10			10
Other costs		0			22			22			22			22			22

a-1.	Calculate the NPV of the proposed polyzone project, if spread in year 4 holds at $1.12 per pound. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Net present value

$

a.2.

What