Question: Consider the following cash flows on two mutually exclusive projects. Year Project A Project B 0 -54,000 -64,000 1 26,000 29,000 2 32,000 38,000 3

Consider the following cash flows on two mutually exclusive projects.

Year	Project A	Project B
0	-54,000	-64,000
1	26,000	29,000
2	32,000	38,000
3	19,000	23,000

The cash flows of Project A are expressed in real terms which those of Project B are expressed in nominal terms. The appropriate nominal discount rate is 11 percent and the inflation rate is 4 percent. Which project should you choose?

Please show step by step calculations so I can see how you obtained the answer. Including any formulas you use.

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