Question: Your company is considering two projects and has estimated the following cash flows: Year Project A Project B 0 -15,000 -20,000 1 10,000 10,000 2

Your company is considering two projects and has estimated the following cash flows:

Year Project A Project B
0 -15,000 -20,000
1 10,000 10,000
2 10,000 18,000

If project B expands your manufacturing capacity by building a separate factory, what is the relevant cash flow for evaluating project B in year 2?

If project B replaces an existing factory (project A), what is the relevant cash flow for evaluating project B in year 2?

If project B replaces an existing factory (project A), what is the relevant cash flow for evaluating project B in year 0?

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