Question 7 [14 Marks] A machinery company is evaluating two mutually exclusive equipment investments that would increase its production capacity. The company uses a 14% required rate of return to evaluate capital expenditure projects. The two investments have the following costs and expected cash flow streams: 7 Year 0 1 2 3 4 5 6 Investment D (Rands) -R50,000 24,000 24,000 24,000 MBA5903 OCTOBER NOVEMBER 2020 Investment E (Rands) -R50,000 15,000 15,000 15,000 15,000 15,000 15,000 Required: 7.1. Calculate the net present value for Investments D and E. 7.2. Create a replacement chain for Investment D. Assume that the cost of replacing D remains at R50,000 and that the replacement project will generate cash inflows of R24,000 for years 4 through 6. Using these figures, recalculate the net present value for Investment D. (2) 7.3. Which of the two investments should be chosen, D or E? why? (2) 7.4. Use the equivalent annuity method to solve this problem. How does your answer compare with one obtained in Part 7.2? (6)