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.
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.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 7P
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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
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