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

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

a.

NPVs = $40,020: NPVT = $109,240

b.

NPVs = $8,860: NPVT = $109,240

c.

NPVs = $14,690: NPVT = $109,240

d.

None of these are correct