You are considering investing $ 2987500 today in a project that will earn $ 337100 after tax in its first year and continue growing each year for ever, increasing in line with prices generally. Inflation is forecast to be 3.2% per annum, and your discount rate is 11.2 % per annum.

a) Calculate the NPV of this project using real cash flows

b) Check that you get the same answer by valuing the cash flows using the Gordon growth model. If you get different answers, there may be a step missed.