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Problem #3: Financial Analysis and Inflation (1) Below you are given the nominal interest rate (cost of capital) and the real interest rate (cost of capital). Calculate the implied nominal discount rate. ( 4 poi points Rcal discount rate 9.00% 12.67% Implied nominal discount rate 12.67% Estimated inflation 3.67% You are a senior financial analyst for a leading consulting firm in Ypsilanti. Your supervisor has asked you to prepare an NPV analysis of a capital investment decision for an important client. This client took a cost accoubting course at EMU and would like to see the analysis done in both real and nominal dollars. Show your work so I can give you partial credit (2) The timeline below shows the real cash flows associated with the project. Use the data in part (1) of the problem to calculate the real NPV for the project. (4 points real NPV Problem 1 Problem #2 Problem #3 + ady 10 (2) The timeline below shows the real cash flows associated with the project. Use the data in part (1) of the problem to calculate the real NPV for the project. (4 11 12 points 13 real NPV 14 15 0 1 4 5 6 Z 16 real cash flows ($100,000) $22,000 $22,000 $22,000 $22,000 $22,000 $22,000 $22,000 17 NPV 18 19 20 21 (2) Calculate NPV using nominal dollars. (4 points) 22 A B 119 20 21 22 (2) Calculate NPV using nominal dollars. (4 points) 23 points 24 nominal NPV 25 26 10 1 27 2 2 3 4 5 LO Z nominal cash flows 28 29 NPV 30 31

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