Question 3 (30 points): Consider escalation rates of 8% for all costs, 10% for all incomes, and an inflation rate of 4% applied to the following cash flow: Year 0 1 2 3 4 5 6 7 Cost -30,0000 0 0 -30,000 0 0 0 | Income | 0 8,000 8,000 8,000 8,000 8,000 8,000 8,000 C: Cost, I: Income, E: Environmental Remediation Cost, L: Salvage Value 8 0 8,000 9 0 8,000 E= -25,000 L = +15,000 Page 1 of 2 a) Calculate the ROR in escalated dollars and in constant dollars for this investment project (15 points) b) Calculate the NPV in escalated dollars and in constant dollars for this investment project assuming a 12.5% escalated dollar minimum rate of return (15 points). Hint: To calculate the NPV in constant dollars, you need to calculate the constant dollar minimum rate of return using the Fisher Rule. Question 3 (30 points): Consider escalation rates of 8% for all costs, 10% for all incomes, and an inflation rate of 4% applied to the following cash flow: Year 0 1 2 3 4 5 6 7 Cost -30,0000 0 0 -30,000 0 0 0 | Income | 0 8,000 8,000 8,000 8,000 8,000 8,000 8,000 C: Cost, I: Income, E: Environmental Remediation Cost, L: Salvage Value 8 0 8,000 9 0 8,000 E= -25,000 L = +15,000 Page 1 of 2 a) Calculate the ROR in escalated dollars and in constant dollars for this investment project (15 points) b) Calculate the NPV in escalated dollars and in constant dollars for this investment project assuming a 12.5% escalated dollar minimum rate of return (15 points). Hint: To calculate the NPV in constant dollars, you need to calculate the constant dollar minimum rate of return using the Fisher Rule