Question: Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0 $58,000 $73,000 1 38,000 37,000 2 33,000 46,000 3

Consider the following cash flows on two mutually exclusive projects:

Year Project A Project B

0 $58,000 $73,000

1 38,000 37,000

2 33,000 46,000

3 28,000 49,000

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 13 percent and the inflation rate is 5 percent. Calculate the NPV for each project.

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