real versus nominal rates Retum to problem 8 above. Suppose investment and operating ca sh flow projections

Question:

real versus nominal rates Retum to problem 8 above. Suppose investment and operating ca sh flow projections are all in real terms. Ralph's real cost of capital is 9%. A 6% inflation rate is anticipated over the next 4 years. (This implies a nominal eost of capital of

(1.09)(1.06) - 1 = 15.54%.) Determine the project's present value.

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