EX 26-21 Net present value-unequal lives OBJ.3,4 alueBunker Hill Mining Company has two competing proposals: a processing mill and an Net present value, rocessing mill, 196,220 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: Net Cash Flow Year Processing Mill Electric Shovel $310,000 260,000 260,000 260,000 180,000 130,000 120,000 120,000 $330,000 325,000 325,000 320,000 Excel 4 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 table presented in this chapter (Exhibit 2). The estimated residual value of the processing mill at the end of Year 4 is $280,000. QBJ. 3 Processing Mill Present Value of $1 at 15% Net Cash Flow Present Value of Net = Cash Flow Year 1 Year 2 Year 3 Year 4 Year 4 residual value) Total Amount to be invested Net present value 28 30 31 32 Electric Shovel Present Value of $1 at 15% Net Cash Flow Present Value of Net Cash Flow 34 35 36 37 38 39 - x Year 1 Year 2 Year 3 Year 4 Total Amount to be invested Net present value 40 42 43 45 as an investment 46 The Processing Mill is 47 48 49 as an investment. The Electric Shovel is The is preferred if only one investment is possible. 50 51 52