Anan Corp is evaluating 2 mutually exclusive equipment investments that would increase its production capacity. the company uses 14 percent required rate of return to evaluate capital expenditure projects. the 2 investments have the following costs and expected cash flow streams.

year investment D investment E

0 -50,000 -50,000

1 24,000 15,000

2 24,000 15,000

3 24,000 15,000

4 0 15,000

5 0 15,000

6 0 15,000

Show all steps and calculations.

1. Calculate the net present value for investment D and E.
2. What is a replacement chain for investment . Assume that the cost of replacing D remains at 50,000 and tat the replacement project will renerate cash inflows of 24,000 for years 4 through 6. Using these figures, recalculate the net present value for investment D.
3. Which of the two investments must be chosen? Why?
4. Use the equivalent annual annuity method to solve this problem. How does your answer compare with the one obtained in part 2?