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 Investment Production (millions of pounds per year) Spread ($ per pound) Net revenues Production costs Transport Other costs Year 0 140 0 1.10 0 0 0 0 0 1.10 0 0 0 35 55 1.10 60.50 45.00 O 35 95 1.10 104.50 45.00 0 35 Cash flow -140 -35 -19.50 24.50 NPV (at r = 88) = 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 8%. (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.) Period Book income ($ in Book rate of return millions) (%) Economic income ($ in millions) 0 0 0 1 (49.00) 2 (33.50) (35.00) (26.59) 9.38 10.71 3 10.50 4 10.50 5 10.50 12.50 6 15.00 10.50 10.50 7 18.75 8 25.00 10.50 10.50 9 37.50 10 10.50 75.00 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 Investment Production (millions of pounds per year) Spread ($ per pound) Net revenues Production costs Transport Other costs Year 0 140 0 1.10 0 0 0 0 0 1.10 0 0 0 35 55 1.10 60.50 45.00 O 35 95 1.10 104.50 45.00 0 35 Cash flow -140 -35 -19.50 24.50 NPV (at r = 88) = 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 8%. (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.) Period Book income ($ in Book rate of return millions) (%) Economic income ($ in millions) 0 0 0 1 (49.00) 2 (33.50) (35.00) (26.59) 9.38 10.71 3 10.50 4 10.50 5 10.50 12.50 6 15.00 10.50 10.50 7 18.75 8 25.00 10.50 10.50 9 37.50 10 10.50 75.00