Net Present Value-Unequal Lives Bunker Hill Mining Company has two competing pro
ID: 2432552 • Letter: N
Question
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 $583,518. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year Processing Mill Electric Shovel $187,000 166,000 166,000 133,000 101,000 84,000 73,000 73,000 2 3 4 $234,000 217,000 200,000 206,000 8 The estimated residual value of the processing mill at the end of Year 4 is $230,000Explanation / Answer
Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Processing Mill Electric showel Present Value of net cash flow total 664,416.00 655,327.00 Less Amount to be invested (583,518.00) (583,518.00) Net Present Value 80,898.00 71,809.00 Project processing mill should be preferred Processing Mill Electric Shovel Year PVF Amount PV Amount PV 1.00 0.893 187,000.00 166,991.00 234,000.00 208,962.00 2.00 0.797 166,000.00 132,302.00 217,000.00 172,949.00 3.00 0.712 166,000.00 118,192.00 200,000.00 142,400.00 4.00 0.636 133,000.00 84,588.00 206,000.00 131,016.00 5.00 0.567 101,000.00 57,267.00 6.00 0.507 84,000.00 42,588.00 7.00 0.452 73,000.00 32,996.00 8.00 0.404 73,000.00 29,492.00 664,416.00 655,327.00