The replacement chain approach $-$ Evaluating projects with unequal lives

Evaluating projects with unequal lives

Blue Elk Manufacturing is a U$.$S$.$ firm that wants to expand its business internationally. It is considering potential projects in both Italy and Canada, and the Italian 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 project after three years. These projects are mutually exclusive, so Blue Elk Manufacturing's CFO plans to use the replacement chain approach to analyze both projects. The expected cash flows for both projects follow:

$\backslash$table$[[$Project:$,$Italian$],[$Year $0$:$,-$$$650,000$