# Question

Consider a project starting in year t = 0 and lasting until year t = 3. The inflation is known to remain 10% per year during the entire project horizon. In current (nominal) prices, the net benefits for each of the four years are: NB0 = –20, NB1 = 15, NB2 = 5, NB3 = –3. The nominal discount rate is 15%.

a. Find the NPV using the nominal net benefits and nominal discount rate.

b. Calculate the net benefits for each of the four years in real terms (in period 0 prices). Calculate the real (i.e. inflation adjusted) discount rate.

c. Find the NPV using the real net benefits and the real discount rate calculated in b). Compare with the result in a).

a. Find the NPV using the nominal net benefits and nominal discount rate.

b. Calculate the net benefits for each of the four years in real terms (in period 0 prices). Calculate the real (i.e. inflation adjusted) discount rate.

c. Find the NPV using the real net benefits and the real discount rate calculated in b). Compare with the result in a).

## Answer to relevant Questions

Logan, Ltd. makes two products, tables and chairs, which must be processed through assembly and finishing departments. Each table requires 5 hours to assemble and 3 hours to finish, but each chair requires 2 hours to ...A rectangular storage container with an open top is to have a volume of 1500 cubic centimeters. The length of its base is 1.5 times the width. Material for the base costs 25 cents per square centimeter. Material for the ...Individuals filing federal income tax returns prior March 31 received an average refund of $1056. Consider the populations of last minute filers who mail their tax return during the last five days of the income tax period ...Let V be a vector space with dimension n > 0. If i is an integer such that 0 ≤ i ≤ n, prove that V contains at least one subspace U such that dim (U) = i.Solve the following problem by doing hand calculations. Please do not use Excel or any other computer software. The following data represents the overall miles per gallon (MPG) of mid-sized sedans.27 31 36 28 34 ...Post your question

0