Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $720,000. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year Processing Mill Electric Shovel 1 $313,000 $346,000 2 276,000 322,000 3 276,000 317,000 4 267,000 314,000 5 183,000 6 147,000 7 135,000 8 135,000 The estimated residual value of the processing mill at the end of Year 4 is $280,000. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 20%. If required, round to the nearest dollar. Processing Mill Electric Shovel Net present value $fill in the blank 2 $fill in the blank 3 Which project should be favored?
Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $720,000. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year Processing Mill Electric Shovel 1 $313,000 $346,000 2 276,000 322,000 3 276,000 317,000 4 267,000 314,000 5 183,000 6 147,000 7 135,000 8 135,000 The estimated residual value of the processing mill at the end of Year 4 is $280,000. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 20%. If required, round to the nearest dollar. Processing Mill Electric Shovel Net present value $fill in the blank 2 $fill in the blank 3 Which project should be favored?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $720,000. The net cash flows estimated for the two proposals are as follows:
| Net Cash Flow | ||||
| Year | Processing Mill | Electric Shovel | ||
| 1 | $313,000 | $346,000 | ||
| 2 | 276,000 | 322,000 | ||
| 3 | 276,000 | 317,000 | ||
| 4 | 267,000 | 314,000 | ||
| 5 | 183,000 | |||
| 6 | 147,000 | |||
| 7 | 135,000 | |||
| 8 | 135,000 |
The estimated residual value of the processing mill at the end of Year 4 is $280,000.
This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.
Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum
| Processing Mill | Electric Shovel | |
| $fill in the blank 2 | $fill in the blank 3 |
Which project should be favored?
Transcribed Image Text:Net present value-unequal lives
Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. The following data is
nrovided:
DATA
Net Cash Flow
Processing Mill
$313,000
Electric Shovel
$346,000
Year
322,000
317,000
314,000
276,000
3
276,000
267,000
280,000
183,000
147,000
135,000
135,000
4
4 (residual value)
5
6
7
Initial investment
$720,000
Minimum rate of return
20%
Using tormuias ana cell rererences, perrorm tne requirea anaiysıs, ana input your answers into the Processıng MIII ana Electric
Shovel columns. Transfer the numeric results for the green entry cells (C24:D24) into the appropriate fields in CNOWV2 for
aradina
Processing Mill
Electric Shovel
Formulas
Net present value
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