Two mutually exclusive projects being considered by a firm and have the following projected cash flows:

Project A Project B

Year Cash Flow Cash Flow

0 ($120,000) ($120,000)

1 55,000 30,000

2 55,000 30,000

3 55,000 30,000

4 30,000

5 30,000

6 30,000

The cost of capital is 10 percent. Using the NPV rule, evaluate both projects using the replacement approach?