Problem: Pinkerton Truck Rental is considering two mutually exclusive engine development projects. The RPX design has an expected life of 4 years and projected cash inflows are $3.6 million at the end of each of the first 2 years and $1.8 million in each of the next 2 years. The RPB design is more flexible and has an 8-year life. The projected end-of-year flows from the RPB design are $2.4 million in each of the first two years and $2.0 million in each of the next six years. Both projects require an initial investment of $5.4 million, and Pinkerton's cost of capital is 12%. Frequent changes in engine technology make engine development risky, but Pinkerton feels that the basic designs can be refined and modified. Thus, Pinkerton often assumes that continuous replacements can be made as a project's life ends. What is the net present value (on an 8-year extended basis) of the project with the most value to the company?
a. $3.976 million
b. $4.325 million
c. $5.085 million
d. $5.211 million
e. $5.861 million