Question: Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0 $ 68,000 $ 83,000 1 48,000 47,000 2 43,000

Consider the following cash flows on two mutually exclusive projects:

Year	Project A		Project B
0	$	68,000	$	83,000
1		48,000		47,000
2		43,000		56,000
3		38,000		59,000

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 11 percent and the inflation rate is 5 percent.

Calculate the NPV for each project.

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