13.If the nominal cost of capital is 16%per year and the expected rate of inflation is 5%per year, then compute the real cost of capital. a)21.8% b)11.5% c)11% d)10.5% Answer:(d) 14.The nominal rate of interest is 15.7%and the expected rate of inflation is 6%.Compute the real rate of return. a)22.6% b)10.9% c)9.15% d)7.85% Answer:(c) Use the following table to solve questions 26 through 28. Year Real Cash Flow Nominal Cash Flow 1 800.000 840,000 2 800,000 882,000 3 800,000 926,100 4 800.000 972.405 In the above table,the real cost of capital is 11%per year,and the expected rate of inflation is 5% per year.The initial outlay for this project is $1.5 million. 15.Using the information given above,determine the nominal cost of capital. a16.55% b)15.45% c)11.66% d)5.7% Answer:(a) 16.Compute the NPV of the real cash flows. a)$714,189 b) $981,957 c) $1,009,971 d)$1,290,317 Answer:(b) 6-66-6 13. If the nominal cost of capital is 16% per year and the expected rate of inflation is 5% per year, then compute the real cost of capital. a) 21.8% b) 11.5% c) 11% d) 10.5% Answer: (d) 14. The nominal rate of interest is 15.7% and the expected rate of inflation is 6%. Compute the real rate of return. a) 22.6% b) 10.9% c) 9.15% d) 7.85% Answer: (c) Use the following table to solve questions 26 through 28. Year Real Cash Flow Nominal Cash Flow 1 800,000 840,000 2 800,000 882,000 3 800,000 926,100 4 800,000 972,405 In the above table, the real cost of capital is 11% per year, and the expected rate of inflation is 5% per year. The initial outlay for this project is $1.5 million. 15. Using the information given above, determine the nominal cost of capital. a) 16.55% b) 15.45% c) 11.66% d) 5.7% Answer: (a) 16. Compute the NPV of the real cash flows. a) $714,189 b) $981,957 c) $1,009,971 d) $1,290,317 Answer: (b)