Year Operating cash flows 1 $ 556 comma 000$556,000 $ 381 comma 000$381,000 2 927 comma 000927,000
Question:
| Year | Operating cash flows | |
| 1 | $ 556 comma 000$556,000 | $ 381 comma 000$381,000 |
| 2 | 927 comma 000927,000 | 381 comma 000381,000 |
| 3 | 1 comma 350 comma 0001,350,000 | 381 comma 000381,000 |
| 4 | 2 comma 218 comma 0002,218,000 | 381 comma 000381,000 |
| 5 | 3 comma 401 comma 0003,401,000 | 381 comma 000381,000 |
*After-tax cash inflow expected from liquidation.
a. If Project A, which requires an initial investment of
negative $ 4 comma 650 comma 000$4,650,000,
is a replacement for Project B and the
$ 1 comma 547 comma 000$1,547,000
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.
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Part 1
a. Calculate the relevant cash flows for this replacement decision:(Round to the nearest dollar.)
| Relevant | ||
| Year | Cash Flows | |
| 0 | $ | |
| 1 | $ | |
| 2 | $ | |
| 3 | $ | |
| 4 | $ | |
| 5 | $ |
Expert Answer:
a To calculate the net cash flows for this replacement decision we need to consider the cash flows o... View the full answer
