Arya Co. is considering the following two independent projects. The cash flows for project A are expressed in nominal terms, while those of project B are expressed in real terms. The appropriate nominal discount rate is 8%, and the inflation rate is 3%. Using the exact Fisher equation, calculate the real discount rate. (Enter percentages as decimals and round to 4 decimals).

Year

Project A

Project B

0

-100,000

-75,000

1

25,000

25,000

2

25,000

25,000

3

40,000

25,000

4

40,000

25,000

5

42,000

25,000

Q1 calculate the real discount rate. (Enter percentages as decimals and round to 4 decimals).

Q2calculate the NPV of project A. (Round to 2 decimals)

Q3 calculate the NPV for project B. (Round to 2 decimals)

Q4

Based on the information provided, the firm should:

Year	Project A	Project B
0	-100,000	-75,000
1	25,000	25,000
2	25,000	25,000
3	40,000	25,000
4	40,000	25,000
5	40,000	25,000

accept both

accept A, reject B

reject both

reject A, accept B