Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $497,066. The net cash flows estimated for the two proposals are as follows:

Net Cash Flow
Year	Processing mil	Electric Shovel
1	158,000	198,000
2	141,000	183,000
3	141,000	169,000
4	112,000	174,000
5	85,000
6	671,000
7	62,000
8	62,000

The estimated residual value of the processing mill at the end of Year 4 is $200,000. Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 15%.

 

Answer rating: 100% (QA)

ANSWER Net present ... View the full answer