Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $ 750,000. The net cash flows estimated for the two proposals are as follows:

The estimated residual value of the processing mill at the end of Year 4 is $ 280,000.
Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 15%. Use the present value tables presented in this chapter (Exhibits 1 and2).

Net Cash Flow Year Processing M 310,000 260,000 260,000 260,000 180,000 130,000 120,000 120,000 Electric Shovel 330,000 325,000 325,000 320,000 8