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a. If Project A were actually a replacement for Project B and if the $11,200 initial investment shown for Project B were the after-tax cash

image text in transcribeda. If Project A were actually a replacement for Project B and if the $11,200 initial investment shown for Project B were the after-tax cash inflow expected from liquidating it, what would be the relevant cash flows for this replacement decision?

b. How can an expansion decision such as project A be viewed as a special form of a replacement decision? Explain.

Expansion versus replacement cash flows Edison Systems has estimated the cash flows over the 5-yearlives for two projects, A and B. These cash flows are summarized in the following table. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Project A Project B $39,400 $11,200 Initial investment Year Operating cash flows $10,100 $7,000 11.700 7,000 13,100 7,000 7,000 16.700 10,400 7,000 "After-tax cash inflow expected from liquidation

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