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 12% return. (For example, if you bought a 737 for $19.91 million at the start of year 1 and sold it a year later, your total profit would be 18.10 + 4.20 19.91 = $2.39 million, 12% of the purchase cost.) Assume airlines write off their aircraft straight-line over 15 years to a salvage value equal to 15% of the original cost.

Start of Year	Market Value	Cash Flow
1	19.91
2	18.10	4.20
3	17.01	3.26
4	15.89	3.16
5	15.11	2.69
6	14.20	2.72
7	13.58	2.32
8	12.79	2.42
9	12.27	2.05
10	11.57	2.17
11	11.13	1.83
12	10.50	1.97
13	10.13	1.63
14	9.55	1.80
15	9.23	1.47
16	8.70	1.64

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.)

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