Consider the following information relating to the expected cash flows from two independent projects. The cash flows are expressed in real terms, the nominal discount rate is 10% p.a. and the expected inflation rate is 4% p.a. 1) Calculate the NPV of each of the projects 2). In no more than 6 lines, explain which of the above projects you should select and why?
Consider the following information relating to the expected cash flows from two independent projects. The cash flows are expressed in real terms, the nominal discount rate is 10% p.a. and the expected inflation rate is 4% p.a. 1) Calculate the NPV of each of the projects 2). In no more than 6 lines, explain which of the above projects you should select and why?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Consider the following information relating to the expected cash flows from two independent projects. The cash flows are expressed in real terms, the nominal discount rate is 10% p.a. and the expected inflation rate is 4% p.a.
1) Calculate the
2). In no more than 6 lines, explain which of the above projects you should select and why?
Transcribed Image Text:Project 1
-$200,000
$50,000
$50,000
$50,000
Project 2
-$250,000
$65,000
$65,000
$65,000
$65,000
$65,000
$65,000
Time
1
3
$50,000
$50,000
4
5
6.
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