Need help on this question. ($ millions)Year 1Year 0110Year 2Years 3–10InvestmentProduction (millions of pounds per year)Spread ($ per pound)Net revenues52921.071.071.071.0755.6498.44Production costs42.0042.00TransportOther costs323232Cash flow-11032-18.36-24.44NPV (at r= 10%) = 0Assume 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%. (Negativeanswers 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 incomeanswers in millions rounded to 2 decimal places and enter the rate of return as a percent rounded to 2 decimal places.)Period:124Book income ($)Book rate of return (%)Economic income ($)789.10Book income ($)Book rate of return (%)Economic income ($)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%b-2. Now compute the steady-state book rate of return (ROI) for a mature company producing polyzone. (Do not round intermediate calculations. Enter your answer as a percentrounded to 2 decimal places.)ROI%

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Answered: Investment Production (millions of…

Business

Finance

Investment Production (millions of pounds Spread ($ per pound) Net revenues Production costs Transport Other costs

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Need help on this question.

($ millions)
Year 1
Year 0
110
Year 2
Years 3–10
Investment
Production (millions of pounds per year)
Spread ($ per pound)
Net revenues
52
92
1.07
1.07
1.07
1.07
55.64
98.44
Production costs
42.00
42.00
Transport
Other costs
32
32
32
Cash flow
-110
32
-18.36
-24.44
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 "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:
1
2
4
Book income ($)
Book rate of return (%)
Economic income ($)
7
8
9.
10
Book income ($)
Book rate of return (%)
Economic income ($)
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
%
b-2. Now compute the steady-state book rate of return (ROI) for a mature company producing polyzone. (Do not round intermediate calculations. Enter your answer as a percent
rounded to 2 decimal places.)
ROI
%

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