P11–3 Expansion versus replacement cash flows Stable Nuclear Plant Corporation has estimatedthe cash flows over the 5-year lives for two projects, A and B. These cashflows are summarized in the table...

P11–3 Expansion versus replacement cash flows Stable Nuclear Plant Corporation has estimatedthe cash flows over the 5-year lives for two projects, A and B. These cashflows are summarized in the table below.Project A Project BInitial investment $60,000 $38,000*Year Operating cash inflows1 $20,000 $ 14,0002 18,000 12,0003 16,000 13,0004 12,000 8,0005 10,000 6,000*After-tax cash inflow expected from liquidation.a. If project A were actually a replacement for project B and the $38,000 initialinvestment shown for project B were the after-tax cash inflow expected fromliquidating it, what would be the relevant cash flows for this replacement decision?b. How can an expansion decision such as project A be viewed as a special form ofa replacement decision? Explain.