The owner of the South End bookstore is considering opening a second bookstore on the north side of the campus. He decides to lease an existing building for 5 years, and the expected cash flow show is as below: Year Net Cash Flow in Constant Dollars

0 -$350,000

1 $80,000

2 $110,000

3 $180,000

4 $160,000

5 $140,000

With a general inflation rate of 2% per year and a 6% inflation-free rate of return:

The market interest rate is By using the adjusted discount method, the present worth of the cash flow series is $