Expansion versus replacement cash flows Tesla Systems has estimated the cash flows over the$5-$year lives for two$$ projects, A and B$.$ These cash flows are summarized in the following table.$$

Project A

Project B

Initial investment

$$$$4,654,000$

$$1,544,000*$

Year

Operating cash flows

$1$

$$566,000$

$$390,000$

$2$

$$

$925,000$

$$

$390,000$

$3$

$$

$1,353,000$

$$

$390,000$

$4$

$$

$2,235,000$

$$

$390,000$

$5$

$$

$3,402,000$

$$

$390,000$

$*$After$-$tax cash inflow expected from liquidation.

a$.$ If Project$$ A$,$ which requires an initial investment of $$$$4,654,000,$ is a replacement for Project B and the

$$1,544,000$ initial investment shown for Project B is the$$ after$-$tax cash inflow expected from liquidating$$ it$,$ what would be the net cash flows for this replacement$$ decision? b$.$ How can an expansion decision such as project A be viewed as a special form of a replacement$$ decision? Explain.