Edison Systems has estimated the cash flows over the 5-year lives for two projects, A and B. These cash flows are summarized in the table below.

a. If project A were actually a replacement for project B and if the $12,600 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.

	Project A	Project B
Initial investment	$40,300	$12,600
Year	Operating cash flows
1	$10,900	$5,700
2	11,200	5,700
3	13,700	5,700
4	15,500	5,700
5	10,100	5,700

Calculate relevant Cash flows for this replacement decision:

Year	Relevant Cash Flows
0
1
2
3
4
5