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 4 percent. Which project should you choose? 

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CHAPTER 6 Making Capital Investment Decisions 199 15. Capital Budgeting with Inflation Consider the following cash flows on two mutually exclusive projects: Year Project A Project B -$30,000 -$45,000 18,000 21,000 2 16,000 23,000 3 12,000 25,000 CHAPTER 6 Making Capital Investment Decisions 199 15. Capital Budgeting with Inflation Consider the following cash flows on two mutually exclusive projects: Year Project A Project B -$30,000 -$45,000 18,000 21,000 2 16,000 23,000 3 12,000 25,000

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The Impact of Inflation can be accommodated in Capital Budgeting decision making by disco... View the full answer