Arya Co. is considering the following two mutually exclusive projects. The cash flows for project A are expressed in nominal terms, while those of project B are expressed in real terms. The appropriate nominal discount rate is 9% and the inflation rate is 3%.
Year Project A Project B
0 -220,000 -180,000
1 60,000 65,000
2 60,000 65,000
3 60,000 40,000
4 90,000 40,000
5 90,000 40,000
Using the exact Fisher equation, calculate the real discount rate. (Enter percentages as decimals and round to 4 decimals).
Using the exact Fisher equation, calculate the NPV of project A. (Round to 2 decimals)
Using the exact Fisher equation, calculate the NPV for project B. (Round to 2 decimals)
