You are considering purchasing a machine to produce golf balls. The cost of the machine is $100,000 and its expected life span is 8 years. The machine will have an annual production of 550,000 balls. The price of a golf ball is today $0.20, and its expected to rise by 10% each year. The material used to produce a golf ball costs $0.08 and its expected to rise by 2% a year. To operate the machine youll need two workers, each earning an annual salary of $30,000. According to their contracts, their salaries will rise by 7% a year starting in the third year. The real discount rate is 4%, the expected inflation is 5%, and the corporate tax rate is 40%.

1. Calculate the NPV of the project using nominal values.
2. Repeat the calculation using real values.