Consider the following project??s after??tax cash flow and the expected annual general inflation rate during the project period:

(a) Determine the average annual general inflation rate over the project period.(b) Convert the cash flows in actual dollars into equivalent constant dollars with year 0 as the base year.(c) If the annual inflation??free interest rate is 5%, what is the present worth of the cash flow?

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Expected Cash Flow (in Actual Dollars) End of Year General Inflation Rate -$45,000 1 $36,000 6.5% 2 $46,000 7.7% 3 $26,000 8.1%