Cash flows ($ millions) 0 -12 2 3 +5.20 +4.80 +4.40 Table Summary: The heading Period spans columns 2 through 5. The firm uses straight-line depreciation. Thus, for this project, it writes off $4 million per year in years 1, 2, and 3. The discount rate is 10%. a. Show that economic depreciation equals book depreciation and show that the book rate of return is the same in each year.

Cash flows ($ millions) 0 -12 2 3 +5.20 +4.80 +4.40 Table Summary: The heading Period spans columns 2 through 5. The firm uses straight-line depreciation. Thus, for this project, it writes off $4 million per year in years 1, 2, and 3. The discount rate is 10%. a. Show that economic depreciation equals book depreciation and show that the book rate of return is the same in each year.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 2E

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