Question 2(2 points)

BONUS (2 marks): You are performing a sensitivity analysis on your project to see how inflation will affect its rate of return. The projected inflation rate is 12%. You work that into your income and net cash flow statement, and you derive the following:

Net Cash Flow

(40,000)

(2,200)

14,759

43,645

The net cash flow above assumes f=12%. Your firm faces a MARR' =8%. You calculate the NPW for your project under the inflation assumptions you derived in the table above, and then you find the NPW for your project under the condition of zero inflation. You report to your employer that the inflation tax for the project is (within $20 of):

Question 2 options:

A) 867 - (-6327) =

B) 867 - (-7071) =

C) 5263 - (-6327) =

D) 5263 - (-7071) =

E) 5263 - 867 =

F) -7071 - (-6327) =

G) None of the above