Use the cash flows and competitive spreads shown in the table below.

		($ millions)
	Year 0	Year 1	Year 2	Years 310
Investment	200
Production (millions of pounds per year)	0	0	50	90
Spread ($ per pound)	1.05	1.05	1.05	1.05
Net revenues	0	0	52.50	94.50
Production costs	0	0	40.00	40.00
Transport	0	0	0	0
Other costs	0	30	30	30
Cash flow	200	30	17.50	24.50
NPV (at r = 8%) = 0

Assume the dividend payout ratio each year is 100%.

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 8%. (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.)

b1. 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

%

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.)

ROI

%

Period Book income ($ in Book rate of return millions) (%) Economic income ($ in millions) 0 1 2 3 4 5 6 7 8 9 10