Problem 12-16 Accounting measures of performance Use the cash flows and competitive spreads shown in the table below.

	($ millions)
	Year 0	Year 1	Year 2	Years 310
Investment	160
Production (millions of pounds per year)	0	0	46	86
Spread ($ per pound)	1.01	1.01	1.01	1.01
Net revenues	0	0	46.46	86.86
Production costs	0	0	36.00	36.00
Transport	0	0	0	0
Other costs	0	26	26	26
Cash flow	160	26	15.54	24.86
NPV (at r = 9%) = 0

a. Calculate the yearbyyear book and economic profitability for investment in polyzone production. Assume straightline 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 "0" 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.)

Period	book income (in millions	Book Rate of return	economic income
1
2
3
4
5
6
7
8
9
10

b1. What is the economic rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b2. Now compute the steadystate 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.)