13.9V at the alternator lug sounds OK for the alternator (the set point for those regulators is 14.1V, but temperature and load bring that down-- usually between 13.7-14.1V is OK). That's a pretty massive voltage drop between the alternator and the positive battery post-- as Klaus said, I'd expect the positive battery cable to be pretty hot to the touch. Cable failures are very common on these cars.

Be prepared for some sticker shock when you price that positive battery cable-- the genuine Volvo part was over $100 last I checked. Ipd has a much better price on an aftermarket cable (it isn't easy to replace generically because of the bolt on bit for the B+ cable)-- I think it was $39. The other tricky bit is getting the old cable out of the cable tray underneath the starter in the '99+ cars. I gave up and routed mine outside that tray.

Good luck!