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

The replacement chain method is used to compare projects with unequal lives. It involves calculating the net present value (NPV) of each project over a common period of time, usually the least common multiple of the project lives. This involves extending the shorter project's cash flows to match the longer project's life.

In this case, if project B's third year cash flow is -$100,000, it means that it has been extended to match project A's three-year life. Therefore, the replacement chain method has been used and the answer is true.

The Projected Cash Flows for Mutually Exclusive Projects Are