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3. Nominal and Real Amounts (20 points). The government is considering to implement a project that would yield benefits each year for the next 10

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3. Nominal and Real Amounts (20 points). The government is considering to implement a project that would yield benefits each year for the next 10 years. The nominal interest rate is equal to 7.1%, while the expected inflation rate is equal to 2%. (a) What is the NPV(B) if the benefits per year are equal to $10 million measured in nominal dollars? Assume the benefits are realized at the end of each year. (10 points) (b) What is the NPV(B) if the benefits per year are equal to $10 million measured in real dollars? Assume the benefits are realized at the end of each year. (10 points)

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