Net Present Value-Unequal Lives Bunker Hill Mining Company has two competing proposals: a processing mill and...
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Net Present Value-Unequal Lives Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $761,595. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year 1 2 Processing Mill Electric Shovel $232,000 $290,000 206,000 269,000 206,000 248,000 165,000 255,000 125,000 6 104,000 7 90,000 90,000 The estimated residual value of the processing mill at the end of Year 4 is $290,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 4 0.792 0.683 0.636 0.572 0.658 0.579 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 90,000 The estimated residual value of the processing mill at the end of Year 4 is $290,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 B 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 10%. Use the present value table appearing above. Present value of net cash flow total Processing Mill Electric Shovel Less amount to be invested Net present value Which project should be favored? Net Present Value-Unequal Lives Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $761,595. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year 1 2 Processing Mill Electric Shovel $232,000 $290,000 206,000 269,000 206,000 248,000 165,000 255,000 125,000 6 104,000 7 90,000 90,000 The estimated residual value of the processing mill at the end of Year 4 is $290,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 4 0.792 0.683 0.636 0.572 0.658 0.579 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 90,000 The estimated residual value of the processing mill at the end of Year 4 is $290,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 B 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 10%. Use the present value table appearing above. Present value of net cash flow total Processing Mill Electric Shovel Less amount to be invested Net present value Which project should be favored?
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