Tesla Systems has estimated the cash flows over the 5-year lives for two projects, A and B. These cash flows are summarized in the table below.

a. If project A, which requires an initial investment of $4,650,000, is a replacement for project B and the $1,550,000 initial investment shown for project B is the after-tax cash inflow expected from liquidating project B, what would be the net cash flows for this replacement decision?
b. Instead, if project A is an expansion decision, what would be the net cash flows and how can it be viewed as a special form of a replacement decision? Explain.

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Project A Project B Initial investment -$4,650,000 $1,550,000 Year Operating cash inflows $ 560,000 $380,000 925,000 380,000 1,350,000 3 380,000 4 2,225,000 380,000 3,400,000 5 380,000