2. consider the following cash flows on two mutually exclusive projects: The cash flows of project A are expressed in real terms while those 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?

• project A (real cash flow): year 0: (67,000); year 1: 43,000; year 2: 37,000; year 3: 23,000
• Project B (Nominal cash flow): year 0: (74,000), year 1: 34,000; year 2: 45,000; year 3: 29,000
• Find discount rate of project A and B and calculate NPV of both projects.