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Business, 27.07.2021 19:00 aliceohern

Bunker Hill Mining Company has two competing proposals: a processing mill and an 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
1 310000 330000
2 260000 325000
3 260000 325000
4 260000 320000
5 180000
6 130000
7 120000
8 120000

The estimated residual value of the processing mill at the end of Year 4 is $280,000. Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 15%. Use the present value tables.

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