Refer to the data in exercise 15.27. Complete the following schedule to calculate the net present value if the real interest rate is 12 percent and inflation is expected to be 8 percent per year. Refer to Illustration 15.11 for present value table under inflation.

(Hint: Inflation affects both the nominal rate of interest and cash flows, and the cash flows for Year 1 will be 8 percent higher than the amounts indicated in exercise 15.27.)

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Time 2 Net annual cash flow Present value factor Present values Net present value 0 Year