Creative Furniture Is Considering Two Mutually Exclusive Projects That Would

Creative Furniture is considering two mutually exclusive projects that would automate part of their production facilities. Project A costs $120,000 and would produce net cash flows of $37,000 annually for 5 years. Project B also costs $120,000 and will produce annual net cash flows of $25,000 for 10 years. Creative's cost of capital is 11%. Using a replacement chain, which project should be chosen? Assume that in 5 years, Project A will still cost $120,000 and produce 5 more years of $37,000 annual net cash flows.

A) Project B, as NPV of A is negative.
B) Project A, as NPV of B is negative.
C) Project B, as NPV is $492 higher.
D) Project A, as NPV is $6,468 higher.