Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $466,339. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year 1 2 $159,000 142,000 142,000 113,000 86,000 72,000 62,000 62,000 The estimated residual value of the processing mill at the end of Year 4 is $200,000. Present Value of $1 at Compound Interest 12% 15% 20% 6% 0.943 0.890 10% 0.909 0.893 0.870 0.833 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.335 0.705 0.564 0.507 0.432 0.665 0.513 0.452 0.376 0.279 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 0.194 0.558 0.386 0.322 0.247 0.162 3 4 5 6 7 8 Year 1 2 3 4 5 6 Processing Mill 7 8 9 10 Electric Shovel $199,000 184,000 170,000 175,000
Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $466,339. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year 1 2 $159,000 142,000 142,000 113,000 86,000 72,000 62,000 62,000 The estimated residual value of the processing mill at the end of Year 4 is $200,000. Present Value of $1 at Compound Interest 12% 15% 20% 6% 0.943 0.890 10% 0.909 0.893 0.870 0.833 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.335 0.705 0.564 0.507 0.432 0.665 0.513 0.452 0.376 0.279 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 0.194 0.558 0.386 0.322 0.247 0.162 3 4 5 6 7 8 Year 1 2 3 4 5 6 Processing Mill 7 8 9 10 Electric Shovel $199,000 184,000 170,000 175,000
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 1CMA
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