Reevaluate the NPV of the proposed polyzone project under each of the following assumptions. Follow the format of Table 11.3. What?s the right management decision in each case?

a. Competitive entry does not begin until year 5, when the spread falls to $1.10 per pound, and is complete in year 6, when the spread is $.95 per pound.

b. The U.S. chemical company can start up polyzone production at 40 million pounds in year 1 rather than year 2.

c. The U.S. company makes a technological advance that reduces its annual production costs to $25 million. Competitors? production costs do not change.

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Year 5-10 4. 100 Investment Production, millions of pounds per 40 80 80 80 year Spread, dollars per pound 1.20 1.20 1.20 1.20 1.10 .95 Net revenues Production costs Transport Other costs 0. 48 96 76 30 30 30 30 4 8. 8. 8. 20 20 20 20 20 Cash flow -100 -20 -6 +38 +30 +18 NPV (at r= 8%) = -$10.3