In an unrelated analysis, Joan was asked to choose between the following two mutually exclusive projects:

Expected Net Cash Flow Year

year	Project S	Project L
0	-$100,000	-$100,000
1	$60,000	$33,500
2	$60,000	$33,500
3		$33,500
4		$33,500

The project provides a necessary service, so whichever one is selected is expected to be repeated into the foreseeable future. Both projects have a 10% cost of capital.

(1) What is each projects initial NPV without replication? Can you use the information to determine which project should be chosen?

(2) Now apply the replacement chain approach to determine the projects extended NPVs. Which project should be chosen?

(3) Repeat the analysis using the equivalent annual annuity approach. Which project should be chosen?

(4) Now assume that the cost to replicate Project S in two years will increase to $105,000 because of inflationary pressures. How should the analysis be handled now, and which project should be chosen?

PLEASE SHOW WORK. THANKS