Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Use the cash flows and competitive spreads shown in the table below. ($ millions) Year 0 Year 1 Year 2 Years 3 10 Investment 170

image text in transcribed

Use the cash flows and competitive spreads shown in the table below. ($ millions) Year 0 Year 1 Year 2 Years 3 10 Investment 170 Production (millions of pounds pero 0 47 87 year) Spread ($ per pound) 1.02 1.02 1.02 1.02 Net revenues 0 47.94 88.74 Production costs 0 37.00 37.00 Transport 0 0 0 Other costs 1 27 27 27 oo 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.) Period Book income ($ in Book rate of millions) return (%) Economic income ($ in millions) 10 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 0 %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Mission Ready Finances Proven Principles To Guide Your Story To Financial Freedom

Authors: Marco Parzych

1st Edition

173321531X, 978-1733215312

More Books

Students also viewed these Finance questions