Question: Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0 -69,000 84,000 1 49,000 48,000 2 44,000 57,000 3

Consider the following cash flows on two mutually exclusive projects:

Year Project A Project B

0 -69,000 84,000

1 49,000 48,000

2 44,000 57,000

3 39,000 60,000

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 4 percent.

Calculate NPV for each project.

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