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Business, 24.01.2020 21:31 21hendlill

Turbomachinery parts inc. is considering two mutually exclusive equipment investments that would increase its production capacity. the firm 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: year investment d investment e 0 -$50,000 -$50,000 1 24,000 15,000 2 24,000 15,000 3 24,000 15,0004 0 15,0005 0 15,0006 0 15,000a. calculate the net present value for investments d and e. b. create a replacement chain for investment d. assume that the cost of replacing d remains at $50,000 and that the replacement project will generate cash inflows of $24,000 for years 4 through 6. using these figures, recompute the net present value for investment d. c. which of the two investments should be chosen, d or e? why? d. use the equivalent annual annuity method to solve this problem. how does your answer compare with the one obtained in part b?

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