Net Present Value-Unequal Lives Bunker Hill Mining Company has two competing pro

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 $230,000

Explanation / 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

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