Dorati Inc. is considering two mutually exclusive projects. Dorati used a 15% required rate of return to

evaluate capital expenditure projects. Assuming the two projects have the costs and

cash flows shown below, determine the NPV for each using a replacement chain.

Year Project S Project T

0 $70,000 $100,000

1 $50,000 $ 60,000

2 $60,000 $ 70,000

3 $ 80,000

4 $ 90,000

A. Assume in two years Project S will still cost $70,000 and produce the same two years of cash flows.

B. Find the IRR (using 6% & 8% or 10% & 11%) of an investment having initial cash outflow of $3,000. The cash inflows during the first, second, third and fourth years are expected to be $700, $800, $900 and $1,200 respectively