The following is a copy of Example 9.2 in your lecture notes. The adjusted pretax ROC...

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The following is a copy of Example 9.2 in your lecture notes. The adjusted pretax ROC is 20.42% (see below). Change n=10 to n=7 and recompute the adjusted pretax ROC. a. Below 16% b. 16% to 18% c. 18% to 20% d. Above 20% Numbers in blue are assumed to be given. All other numbers are computed. Year 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Year Current -1 -2 n= -3 + -5 -6 -7 -8 -9 -10 -11 -12 BV of research asset Amortization 10 R&D $3,030.0 0 $3,266.0 0 $3,366.0 0 $2,314.0 0 $2,028.0 0 $1,655.0 0 $1,117.00 $864.00 $845.00 $823.00 $663.00 $723.00 $888.00 Unamortized portion % 100.0% $3,030.00 90.0% $2,939.40 80.0% $2,692.80 70.0% $1,619.80 60.0% $1,216.80 50.0% $827.50 40.0% $446.80 30.0% $259.20 20.0% $169.00 10.0% $82.30 0.0% $0.00 0.0% $0.00 0.0% $0.00 $13,283.6 0 Reported Adiusted Amortizatio n $0.00 $326.60 $336.60 $231.40 $202.80 $165.50 $111.70 $86.40 $84.50 $82.30 $66.30 $0.00 $0.00 $1,694.10 Difference Below 16% 16% to 18% 18% to 20% Above 20% 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 -2 -3 -4 -5 -6 -8 -9 -10 -11 -12 BV of research asset Amortization 0 $2,314.0 0 $2,028.0 0 $1,655.0 0 $1,117.00 $864.00 $845.00 $823.00 $663.00 $723.00 $888.00 BV of research assets (2007) BV of equity (2007) BV of capital (2007) Operating income Net income Return on equity Pretax return on capital 80.0% $2,692.80 70.0% $1,619.80 60.0% $1,216.80 50.0% $827.50 40.0% $446.80 30.0% $259.20 20.0% $169.00 10.0% 0.0% 0.0% 0.0% 0 $82.30 $0.00 $0.00 $0.00 $13,283.6 Reported Adjusted $11,948.0 0 $17,869.0 0 $29,817.0 0 $21,985.0 $33,933.0 $5,594.00 $6,929.90 $4,196.00 $5,531.90 23.48% 18.55% 25.44% 20.42% $336.60 $231.40 $202.80 $165.50 $111.70 $86.40 $84.50 $82.30 $66.30 $0.00 $0.00 $1,694.10 Difference $11,948.00 $11,948.00 $1,335.90 $1,335.90 -4.93% -5.02% The following is a copy of Example 9.2 in your lecture notes. The adjusted pretax ROC is 20.42% (see below). Change n=10 to n=7 and recompute the adjusted pretax ROC. a. Below 16% b. 16% to 18% c. 18% to 20% d. Above 20% Numbers in blue are assumed to be given. All other numbers are computed. Year 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Year Current -1 -2 n= -3 + -5 -6 -7 -8 -9 -10 -11 -12 BV of research asset Amortization 10 R&D $3,030.0 0 $3,266.0 0 $3,366.0 0 $2,314.0 0 $2,028.0 0 $1,655.0 0 $1,117.00 $864.00 $845.00 $823.00 $663.00 $723.00 $888.00 Unamortized portion % 100.0% $3,030.00 90.0% $2,939.40 80.0% $2,692.80 70.0% $1,619.80 60.0% $1,216.80 50.0% $827.50 40.0% $446.80 30.0% $259.20 20.0% $169.00 10.0% $82.30 0.0% $0.00 0.0% $0.00 0.0% $0.00 $13,283.6 0 Reported Adiusted Amortizatio n $0.00 $326.60 $336.60 $231.40 $202.80 $165.50 $111.70 $86.40 $84.50 $82.30 $66.30 $0.00 $0.00 $1,694.10 Difference Below 16% 16% to 18% 18% to 20% Above 20% 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 -2 -3 -4 -5 -6 -8 -9 -10 -11 -12 BV of research asset Amortization 0 $2,314.0 0 $2,028.0 0 $1,655.0 0 $1,117.00 $864.00 $845.00 $823.00 $663.00 $723.00 $888.00 BV of research assets (2007) BV of equity (2007) BV of capital (2007) Operating income Net income Return on equity Pretax return on capital 80.0% $2,692.80 70.0% $1,619.80 60.0% $1,216.80 50.0% $827.50 40.0% $446.80 30.0% $259.20 20.0% $169.00 10.0% 0.0% 0.0% 0.0% 0 $82.30 $0.00 $0.00 $0.00 $13,283.6 Reported Adjusted $11,948.0 0 $17,869.0 0 $29,817.0 0 $21,985.0 $33,933.0 $5,594.00 $6,929.90 $4,196.00 $5,531.90 23.48% 18.55% 25.44% 20.42% $336.60 $231.40 $202.80 $165.50 $111.70 $86.40 $84.50 $82.30 $66.30 $0.00 $0.00 $1,694.10 Difference $11,948.00 $11,948.00 $1,335.90 $1,335.90 -4.93% -5.02%