Inflation is 2% per year; the interest rate is 8% per year. Your perpetuity project has cash flows that grow at 1% faster than inflation forever, starting with $20 next year. a) What is the real interest rate, both accurate (the 1+ version) and approximate (the subtraction version)? b) What is the correct project PV ? c) What would you get if you grew a perpetuity project of $20 by the real growth rate of 1%, and then discounted it at the nominal cost of capital? d) What would you get if you grew a perpetuity project of $20 by the nominal growth rate of 3%, and then discounted it at the real cost of capital? Performing either of the latter two calculations is not an uncommon mistake in practice.

Please provide answers on how to get these answers

A: a) 5.88%. b) The correct PV $400 c) You will get the incorrect value of $285.71. d) You will get the incorrect value of $694.44.