Consider the following cash flows on two mutually exclusive projects:

Year Project A Project B

$0-$$$53,000-$$$59,000$

$1$ $$24,000$ $$27,000$

$2$ $$22,000$ $$26,000$

$3$ $$20,000$ $$25,000$

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 $11\%$ and the inflation rate is $3\%.$ Which project should you choose?

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