Use the cash flows and competitive spreads shown in the tablebelow.

		($ millions)
	Year 0	Year 1	Year 2	Years 3–10
Investment	180
Production (millions of pounds per year)	0	0	48	88
Spread ($ per pound)	1.03	1.03	1.03	1.03
Net revenues	0	0	49.44	90.64
Production costs	0	0	38.00	38.00
Transport	0	0	0	0
Other costs	0	28	28	28
Cash flow	–180	28	–16.56	–24.64
NPV (at r = 7%) = 0

Assume the dividend payout ratio each year is 100%.

a. Calculate the year-by-year book and economicprofitability for investment in polyzone production. Assumestraight-line depreciation over 10 years and a cost of capital of7%. (Negative answers should be indicated by a minus sign.Leave no cells blank - be certain to enter "0" whereverrequired. Do not round intermediate calculations.Enter your income answers in millions rounded to 2 decimal placesand enter the rate of return as a percent rounded to 2 decimalplaces.)

Period:	0	1	2	3	4	5
Book income ($)
Book rate of return (%)
Economic income ($)

	6	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 answeras a percent rounded to 2 decimal places.)

Economic rate of return            %

b-2. Now compute the steady-state book rate ofreturn (ROI) for a mature company producing polyzone. (Donot round intermediate calculations. Enter your answer as a percentrounded to 2 decimal places.)

ROI            %