Question
Consider the following cash flows on mutually exclusive projects: year Project A Project B 0 -$65,000 -$72,000 1 35,000 31,000 2 40,000 41,000 3 30,000
Consider the following cash flows on mutually exclusive projects:
| year | Project A | Project B |
| 0 | -$65,000 | -$72,000 |
| 1 | 35,000 | 31,000 |
| 2 | 40,000 | 41,000 |
| 3 | 30,000 | 51,000 |
Cash flows of project A are expressed in real terms; cash flows of project B are expressed in nominal terms. The appropriate real discount rate is 9 percent, and inflation is 5 percent.
Which project should you choose?
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Real Estate Finance
Authors: Walt Huber, Levin P. Messick
5th Edition
0916772438, 9780916772437
