The Web site www.mhhe.com/bma contains an Excel program for calculating the profitability of the Nodhead project. Now suppose that the cash flows from Nodheads new

The Web site www.mhhe.com/bma contains an Excel program for calculating the profitability of the Nodhead project. Now suppose that the cash flows from Nodhead’s new supermarket are as follows:

a. Recalculate economic depreciation. Is it accelerated or decelerated?
b. Rework Tables 12.2 and 12.3 to show the relationship between
(i) The “true” rate of return and book ROI and
(ii) True EVA and forecasted EVA in each year of the project’slife.

TABLE 12.2 Year 2 3 4 5 Cash flow Book value at start of yea 1,000 Book value at end of year 834 Book Book income Book ROI EVA 100 298 834 667 167 667 167 167 167 131 167 67 -0.067 167 167 83 167 131 167 130 ation 0.263 81 0.040 0.125 0.394 0.782 TABLE 12.3 Year Cash flow PV at start of year PV at end of year Economic dep Economic income Rate of return EVA 298 740 250 1,000 1 1,000 1,000 3 740 224 246 52 0.10 0.00 0.10 0.00 0.10 0.00 0.10 0.00 0.10 0.00 0.00