Problem 12-24 Accounting measures of performance The table given below shows how, on average, the market value of a Boeing 737 has varied with its age and the cash flow needed in each year to provide a 13% return. (For example, if you bought a 737 for $19.85 million at the start of year 1 and sold it a year later, your total profit would be 18.07 + 4.36 19.85 = $2.58 million, 13% of the purchase cost.)

Assume airlines write off their aircraft straight-line over 15 years to a salvage value equal to 10% of the original cost.

Start of Year	Market Value	Cash Flow
1	19.85
2	18.07	4.36
3	16.95	3.47
4	15.86	3.29
5	15.05	2.87
6	14.17	2.84
7	13.52	2.49
8	12.76	2.52
9	12.21	2.21
10	11.54	2.26
11	11.07	1.97
12	10.47	2.04
13	10.07	1.76
14	9.52	1.86
15	9.17	1.59
16	8.67	1.69

a. Calculate economic depreciation, book depreciation, economic return, and book return for each year of the planes life. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter your answers in millions except for percentage values. Round your percentage answers to 1 decimal place and other answers to 2 decimal places.)

Start Of Year	Economic Depreciation	Book Depreciation	Economic Return	Book Return
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16

b-1. Suppose an airline invested in a fixed number of Boeing 737s each year. Calculate the steady-state book rate of return. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b-2. Would steady-state book return overstate or understate true return? multiple choice

Understate

Overstate