Question: Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0 $ 61,000 $ 76,000 1 41,000 40,000 2 36,000

Consider the following cash flows on two mutually exclusive projects:

Year

Project A Project B

0 $ 61,000 $ 76,000

1 41,000 40,000

2 36,000 49,000

3 31,000 52,000

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 answers to 2 decimal places, e.g., 32.16.)

Which product should you choose?

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