1. Sanderson Sand Co. is looking at 2 Projects- PROJECT N and PROJECT O. The cashflows of the 2 projects are as follows:

PROJECT N: PROJECT O:

Year 0 (3,000) Year 0 (5,000)

Year1 1,700 Year 1 3,200

Year 2 1,600 Year 2 1,800

Year 3 1,000 Year 3 900

Year 4 1,300 Year 4 700

Year 5 500

Year 6 400

The firm's cost of capital is 10%.

Calculate the replacement-chain NPV for each project. Which project would be preferred under the replacement chain method?