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Consider the following cash flows on two mutually exclusive projects:
Year Project A Project B
0 –$ 52,000 –$ 67,000
1 32,000 31,000
2 27,000 40,000
3 22,000 43,000
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 12 percent and the inflation rate is 3 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? Project A Project B.
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