Question: Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0 $ 63,000 $ 78,000 1 43,000 42,000 2 38,000
| Consider the following cash flows on two mutually exclusive projects: |
| Year | Project A | Project B | ||
| 0 | $ | 63,000 | $ | 78,000 |
| 1 | 43,000 | 42,000 | ||
| 2 | 38,000 | 51,000 | ||
| 3 | 33,000 | 54,000 | ||
| 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 5 percent. |
| Calculate the NPV for each project. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| NPV | |
| Project A | $ |
| Project B | $ |
| Which project should you choose? | ||||
|
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