Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0 $
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Question:
| Consider the following cash flows on two mutually exclusive projects: |
| Year | Project A | Project B | ||
| 0 | –$ | 56,000 | –$ | 71,000 |
| 1 | 36,000 | 35,000 | ||
| 2 | 31,000 | 44,000 | ||
| 3 | 26,000 | 47,000 | ||
The cash flows of project A are expressed in real terms, whereas those of project B are expressed in nominal terms. The appropriate nominal discount rate is 12 percent and the inflation rate is 3 percent. |
Calculate the NPV for each project. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) |
Project A NPV =
Project B NPV =
Expert Answer:
D30 16 189928N 17 20 22 23 24 A 26 B Year Project A A 2 3 Cash flows 0 S 56000 1 S 36000 S 31... View the full answer
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