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Consider the following cash flows on two mutually exclusive projects: ...

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Finance

Consider the following cash flows on two mutually exclusive projects:
Year Project A Project B
0 $ 62,000 $ 77,000
1 42,000 41,000
2 37,000 50,000
3 32,000 53,000

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 10 percent and the inflation rate is 2 percent.

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

Which project should you choose?
multiple choice

  • Project B

  • Project A

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