Computing the Inflation-Adjusted Present Value
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A project anticipates net cash flows of $10,000 at the end of year one, with such amount growing at the expected 5% rate of inflation over the subsequent four years. Calculate the real present value of this five-year cash stream if the firm employs a nominal discount rate of 15%.
A) $33,522
B) $38,377
C) $43,294
D) $55,000
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Solution Summary
This solution details how to compute a project's inflation-adjusted present value.
Solution Preview
The easiest way to compute this is as the present value of an annuity. Because the question asks for ...
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