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eBook Net present value-unequal lives Dakota Mining Company has two competing proposals: a diamond core drill or a hydraulic excavator. Both pieces of equipment have an initial investment of $740,638. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Net Cash Flow Year Diamond Core Drill Hydraulic Excavator 1 $226,000 $283,000 2 201,000 262,000 3 201,000 242,000 4 160,000 249,000 5 122,000 102,000 7 8 88,000 88,000 The estimated residual value of the diamond core drill at the end of Year 4 is $280,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 10 0.558 0.386 0.322 0.247 0.194 0.162 Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 10%. Use the present value table appearing above. Diamond Core Drill Hydraulic Excavator Present value of net cash flow total Amount to be invested Net present value Which project should be favored? Check My Work Save an All work saved.

eBook Net present value-unequal lives Dakota Mining Company has two competing proposals: a diamond core drill or a hydraulic excavator. Both pieces of equipment have an initial investment of $740,638. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Net Cash Flow Year Diamond Core Drill Hydraulic Excavator 1 $226,000 $283,000 2 201,000 262,000 3 201,000 242,000 4 160,000 249,000 5 122,000 102,000 7 8 88,000 88,000 The estimated residual value of the diamond core drill at the end of Year 4 is $280,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 10 0.558 0.386 0.322 0.247 0.194 0.162 Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 10%. Use the present value table appearing above. Diamond Core Drill Hydraulic Excavator Present value of net cash flow total Amount to be invested Net present value Which project should be favored? Check My Work Save an All work saved.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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net present value — unequal lives Dakota mining company has two competing proposals: a diamond core drill or a hydraulic excavator. Both pieces of equipment have an initial investment of $740,638. The net cash flow is estimated for the two proposals are as follows:
eBook Net present value-unequal lives Dakota Mining Company has two competing proposals: a diamond core drill or a hydraulic excavator. Both pieces of equipment have an initial investment of $740,638. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Net Cash Flow Year Diamond Core Drill Hydraulic Excavator 1 $226,000 $283,000 2 201,000 262,000 3 201,000 242,000 4 160,000 249,000 5 122,000 102,000 7 8 88,000 88,000 The estimated residual value of the diamond core drill at the end of Year 4 is $280,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 10 0.558 0.386 0.322 0.247 0.194 0.162 Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 10%. Use the present value table appearing above. Diamond Core Drill Hydraulic Excavator Present value of net cash flow total Amount to be invested Net present value Which project should be favored? Check My Work Save an All work saved.
Transcribed Image Text:eBook Net present value-unequal lives Dakota Mining Company has two competing proposals: a diamond core drill or a hydraulic excavator. Both pieces of equipment have an initial investment of $740,638. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Net Cash Flow Year Diamond Core Drill Hydraulic Excavator 1 $226,000 $283,000 2 201,000 262,000 3 201,000 242,000 4 160,000 249,000 5 122,000 102,000 7 8 88,000 88,000 The estimated residual value of the diamond core drill at the end of Year 4 is $280,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 10 0.558 0.386 0.322 0.247 0.194 0.162 Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 10%. Use the present value table appearing above. Diamond Core Drill Hydraulic Excavator Present value of net cash flow total Amount to be invested Net present value Which project should be favored? Check My Work Save an All work saved.
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