1 answer

Please help! Problems and Investments Ch 12 i) Saved Help Sav You received partial credit in...

Question:

please help!
Problems and Investments Ch 12 i) Saved Help Sav You received partial credit in the previous attempt 20 Check my work View Ye
Problems and Investments Ch 12 i) Saved Help Sav You received partial credit in the previous attempt 20 Check my work View Year e Years 3-10 Year 1 Year 2 Investment 120 Production (millions of pounds per year) Spread ($ per pound) Net revenues Production costs Transport Other costs 82 42 .97 .97 97 40,74 79.54 32.00 32.00 22 22 22 25.54 -13.26 Cash flow -120 -22 1742 NPV (at r -18% ) -0 ok Assume the dividend payout ratio each year is 100% nces 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 indiceted by a minus sign. Leave no cells blam - be certoin to enter "O" wherever required. Do not round intermediate colculations. Enter your income onswers in millions rounded to 2 decimal places and enter the rate of return as a percent rounded to 2 decimal places.) Economic income ($ in millions) Book income (S in Book rate of return millions) Period (%) Next > KPrey 4 of 8 web and Windows 8

Answers

Following is the working of profitability of Investment in polyzone productions.

Period Workings Book Income Book Rate of return % Econimic Income ($ in millions)
Mlns of Pound per Year
Investments 120.00
Year 1 Net Revenue 0.00
Less: Production Cost 0.00
Less: Depriciation 12.00 (Assuming All investment is in Depreciable Assets)
Less: Transport 0.00
Less: Other Costs 22.00
Total Cost 34.00
Net Income -34.00 -34.00 -28.3%
Less:
Cost of Capital 12% of 120 14.40
Economic Income -48.40 -48.40
Year 2 Investments 120.00
Net Revenue 40.74
Less: Production Cost 32.00
Less: Depriciation 12.00 (Assuming All investment is in Depreciable Assets)
Less: Transport 0.00
Less: Other Costs 22.00
Total Cost 66.00
Net Income -25.26 -25.26 -21.1%
Less:
Cost of Capital 12% of 120 14.40
Economic Income -39.66 -39.66
Year 3 - 10 Investments 120.00
Net Revenue 79.54
Less: Production Cost 32.00
Less: Depriciation 12.00 (Assuming All investment is in Depreciable Assets)
Less: Transport 0.00
Less: Other Costs 22.00
Total Cost 66.00
Net Income 13.54 13.54 11.3%
Less:
Cost of Capital 12% of 120 14.40
Economic Income -0.86 -0.86
.

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