Assume these numbers are inflated, not deflated. The estimated of the inflation rate is 2.5%.

CF(1)= 4.0, CF(2)= 4.0, CF(3)=4.0, CF(4)=6.0, CF(5)=6.0, later years g = 4%.

a. What are the deflated numbers corresponding to the above numbers?

b. If the appropriate deflated discount rate is 11%, what is the present value of those expected cash flows? Use all deflated numbers for your calculations.

c. Now use inflated numbers to calculate the present value.

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a To find the deflated numbers we need to adjust the cash flows based on the estimated inflati... View the full answer