The projected cash flows for mutually exclusive projects are:
If the replacement chain method is used to eliminate the disparity between the projects' lives, project B's third year cash flow is -$100,000.
-150 + 50 = -100

Question

The projected cash flows for mutually exclusive projects are: 
  If the replacement chain method is used to eliminate the disparity between the projects' lives, project B's third year cash flow is -$100,000. 
-150 + 50 = -100

Quizplus · Accepted Answer

This statement is true as per the replacement chain method, we adjust the cash flows of the projects to a common life using the cash flows of the extra years of the longer-lived project. In this case, we can adjust project A's cash flow in year 3 to be $50,000, and then subtract the year 3 cash flow of project B, which is -$150,000. This gives us a net cash flow of -$100,000 for project B in year 3.

The Projected Cash Flows for Mutually Exclusive Projects Are