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

Cash flows of project A are expressed in real terms while those of project B are expressed in nominal terms. The appropriate nominal discount rate is 15 percent, and the inflation is 4 percent. Which project should you choose?

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Year 0123 Project A -$40,000 Project B -$50,000 20,000 10,000 15,000 20,000 3 15,000 40,000