# YearProject AProject B0    –\$51,000    –\$66,000  1   31,000   30,000   2   26,000   39,000  3    21,000   42,000     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 14 percent and the inflation rate is 5 percent.  Calculate the NPV for each project. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)  Project A NPV:Project B NPV:

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 Year Project A Project B 0 –\$ 51,000 –\$ 66,000 1 31,000 30,000 2 26,000 39,000 3 21,000 42,000

 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 14 percent and the inflation rate is 5 percent.

 Calculate the NPV for each project. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Project A NPV:

Project B NPV:

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Step 1

NPV refers to the net present value of a project or investment. The formula used to determine NPV of a project is:

Step 2
Step 3

Given that the cash flows of Project A are expressed in real terms, so we need to discount the cash flows of project A using the real rate.
Cash flows of Project B are expressed in...

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