Question: Storm Ltd is evaluating project $X$ which requires an initial investment of $$ 50,000$. Expected net cash flows are $$ 20,000$ per annum for 4

Storm Ltd is evaluating project $X$ which requires an initial investment of $\$ 50,000$. Expected net cash flows are $\$ 20,000$ per annum for 4 years at today's prices. However these are expected to rise by $5.5 \%$ per annum because of inflation. The firm's cost of capital is $15 \%$. Calculate the NPV by:

(a) discounting money cash flows

(b) discounting real cash flows.

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