The Sunshine Corporation has to make a choice between two different solutions to its current production bottleneck. It can purchase the Superduper Model XT, which is more expensive but will have a useful life of 6 years, or it can purchase the Mediocre Model UX, which is less expensive but will only have a useful life of 3 years. The company requires a 10 percent rate of return on its investments.

The Superduper's cash flows are: Yr0 = -75, Yr1 = 10, Yr2 = 15, Yr3 = 25, Yr4 = 30, Yr5 = 25, Yr6 = 20.

The Mediocre's cash flows are: Yr0 = -50, Yr1 = 25, Yr2 = 30, Yr3 = 13.

Using the replacement chain method, which of these two alternatives is better?

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