Question: Consider the following cash flows on two mutually exclusive projects. The cash flows of Project A are expressed in real terms while those of Project

Consider the following cash flows on two mutually exclusive projects.

The cash flows of Project A are expressed in real terms while those of Project B are expressed in nominal terms. The appropriate nominal discount rate is 11 percent and the inflation rate is 4 percent. Which project should you choose?

YEAR PROJECT A PROJECT B -$46,000 22,000 30,000 16,000 $56,000 29,000 36,000 18,000

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