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 11% return. (For example, if you bought a 737 for $19.89 million at the start of year 1 and sold it a year later, your total profit would be 18.09 + 3.99 19.89 = $2.19 million, 11% of the purchase cost.) Assume airlines write off their aircraft straight-line over 15 years to a salvage value equal to 25% of the original cost.

Start of Year	Market Value	Cash Flow
1	19.89
2	18.09	3.99
3	16.99	3.09
4	15.88	2.98
5	15.09	2.54
6	14.19	2.56
7	13.56	2.19
8	12.78	2.27
9	12.25	1.94
10	11.56	2.04
11	11.11	1.72
12	10.49	1.84
13	10.11	1.53
14	9.54	1.68
15	9.21	1.38
16	8.69	1.53

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?

• Understate

• Overstate