Question 7. [16 Marks] Mekuri Corporation is evaluating two mutually exclusive equipment investments that would increase its production capacity The company uses a 14 percent required rate of return to evaluate capital expenditure projects The two investments have the following costs and expected cash flow streams Investment D R-50 000 24 000 24 000 24 000 Investment E R-50 000 15 000 15 000 15 000 15 000 15 000 15 000 Required: 71 Calculate the net present value for Investments D and E 72 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 year 4 to 6 Using these figures, recalculate the net present value for investment 73 Which of the two investments should be chosen, D or E? Motivate why 74 Use the equivalent annual annuity method to solve this problem How does your answer compare with the one obtained in part 72? Question 7. [16 Marks] Mekuri Corporation is evaluating two mutually exclusive equipment investments that would increase its production capacity The company uses a 14 percent required rate of return to evaluate capital expenditure projects The two investments have the following costs and expected cash flow streams Investment D R-50 000 24 000 24 000 24 000 Investment E R-50 000 15 000 15 000 15 000 15 000 15 000 15 000 Required: 71 Calculate the net present value for Investments D and E 72 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 year 4 to 6 Using these figures, recalculate the net present value for investment 73 Which of the two investments should be chosen, D or E? Motivate why 74 Use the equivalent annual annuity method to solve this problem How does your answer compare with the one obtained in part 72