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Lithium, Inc. is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000 in year one and

Lithium, Inc. is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. Project B costs $120,000 and is expected to generate $64,000 in year one, $67,000 in year two, $56,000 in year three, and $45,000 in year four. Lithium, Inc.'s required rate of return for these projects is 10%. Which project would you recommend using the replacement chain method to evaluate the projects with different lives?

A) Project B because its NPV is higher than Project A's replacement chain NPV of $47,623

B) Project A because its replacement chain NPV is $76,652, which exceeds the NPV for Project B

C) Project A because its replacement chain NPV is $45,642, which is less than the NPV for Project B

D) Both projects will be valued the same since they are now both four year projects.

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