Capital Budgeting with Inflation Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0 $50,000 $65,000 130,00o 29,000 2 2 25,000 38,000 3 20,000 41,000 The cash flows of project A are expressed in real terms, whereas those of project B are expressed in nominal terms. The appropriate nominal discount rate is 15 percent and the inflation rate is 4 percent. Which project should you choose