For a given project you have the following information: The social rate of time preference is 7 % (annually, in nominal terms). The price index for consumer goods (the CPI) is expected to increase by 2 % every year and its assumed it can be used as a deflator for all cases involving project costs and benefits. The marginal rate of return on private investments in the economy is 10 % (annually, in nominal terms). The prices of investment goods are expected to increase by 2 % annually like the CPI. The total investment taking place in 2021 - is 1000 million $ (measured in 2020 prices) and it will last one year to construct and initiate the project. There will be 5 years of benefits and the estimate is annual benefits of 300 million $ for the first two years, measured in 2020 prices. For the last three years the annual benefit will be 330 million $ in nominal terms.

Question:

Calculate the NPV for this project assuming a time span as explained in the text above. Furthermore, do the NPV calculation with all costs, benefits, discount rates measured in real terms (constant prices). Assume a social discount rate corresponding to the social time preferences. If needed, state further assumptions for the calculation