. The replacement chain approach - Evaluating projects with unequal lives Evaluating projects with unequal lives Free Spirit Industries Inc. is a U.S. firm that wants to expand its business internationally. It is considering potential projects in both France and Mexico, and the French project is expected to take six years, whereas the Mexican project is expected to take only three years. However, the firm plans to repeat the Mexican project 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 follow: Project: French Year 0: $800,000 Year 1: $380,000 Year 2: $400,000 Year 3: $420,000 Year 4: $375,000 Year 5: $110,000 Year 6: $85,000 Project: Mexican Year 0: $425,000 Year 1: $175,000 Year 2: $200,000 Year 3: $210,000 If Free Spirit Industries Inc.s cost of capital is 9%, what is the NPV of the French project?

$597,448 $657,193 $477,958 $537,703 Assuming that the Mexican projects 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 Mexican project, using the replacement chain approach?

$117,044 $140,453 $122,896 $105,340