12. The replacement chain approach - Evaluating projects with unequal Ilves Evaluating projects with unequalllves Free Spirit Industries Inc. is a U.S. Pirm that wants to expand its business internationally. It is considering potential projects in both France and Canada, and the French project is expected to take six years, whereas the Canadian project is expected to take only three years. However, the firm plans to repeat the Canadian protect after three years. These projects are mutually exclusive, so Free Spirit Industries Inc.'s CFO plans to use the replacement chain approach to analyze both projects. The expected cash flows for both projects foliow: Project: Year : Year 1 Year 2: Year 3: Year 4: Year 5 Year : French -$700,000 $240,000 $270,000 5290,000 $250,000 5130,000 $110,000 Canadian Project: Year 0 -$520,000 5225000 Year 1 Project: Year O: Year 1: Canadian $520,000 $275,000 $280,000 $295,000 Year 2: Year 3: If Free Spirit Industries Inc.'s cost of capital is 9%, what is the NPV of the French project? $298,557 O $313,485 $328,413 O $253,773 Assuming that the Canadian project's cost and annual cash inflows do not change when the project is repeated in three years and that the cost of capital will remain at 9%, what is the NPV of the Canadian project, using the replacement chain approach? $346,919 O $398,957