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Question 4 a) What is the underlying premise in using Discounted Cash Flow (2 marks) (DCF) to evaluate project investment decisions? b) Consider the following

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Question 4 a) What is the underlying premise in using Discounted Cash Flow (2 marks) (DCF) to evaluate project investment decisions? b) Consider the following 2 machines in Table Q4b below. Using (6 marks) the tables provided, calculate Equivalent Annual Value to ascertain which machine is the best investment. Assume an interest rate i of 3%. Table Q4b Initial Cost Scrap Value Annual Benefits Machine Life (Years) Machine 1 10500 1350 2250 5 Machine 2 11500 1250 2900 4

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