Net Present Value-Unequal LivesDakota Mining Company has two competing proposals: a diamond core drill or a hydraulic excavator. Both pieces of equipment have an initial investment of $710,000.The net cash flows estimated for the two proposals are as follows:YearNet Cash FlowDiamond Core DrillNet Cash FlowHydraulic Excavator1$317,000$341,00023 456978256,000317,000256,000312,000257,000319,000170,000138,000147,000147,000The estimated residual value of the diamond core drill at the end of Year 4 is $280,000.This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.XOpen spreadsheetDetermine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 12%. If required,round to the nearest dollar.Diamond Core DrillNet present value592,850 X$tAHydraulic Excavator271,980 V

Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment by…

Answered: Net Present Value-Unequal Lives Dakota…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

subject ; physic
Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $665,159. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year Processing Mill Electric Shovel 1 $203,000 $254,000 2 181,000 235,000 3 181,000 217,000 4 144,000 223,000 5 110,000 6 91,000 7 79,000 8 79,000 The estimated residual value of the processing mill at the end of Year 4 is $250,000. 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 3 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 9 0.592 0.424 0.361 0.284 0.194 10 0.558…
Harris Corporation has provided the following data concerning an investment project that it is considering: Initial investment Annual cash flow Salvage value at the end of the project Expected life of the project Discount rate $ 160,000 $ 54,000 $ 11,000 O $67,000 O $160,516 O $516 O $(5,776) 4 15 per year years % Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the project is closest to:
IRR of an uneven cash flow stream) Microwave Oven Programming in comidering the construction of a new plant. The plant will have an intal cash oulay of 16 1 milion (= $61 milion) and will produce can fows of 57 9 month and of year 1, 157 milion at the end of your 2, and $15 million at the end of years 3 through 5 What is the internal cale of retam on th The Wd of the project is (ound to two decinal places)
Required information A company that manufactures magnetic flow meters expects to undertake a project that will have the cash flows estimated. First cost, $ Equipment replacement cost in year 2, $ Annual operating cost, $/year Salvage value, $ Life, years -880,000 -300,000 -930,000 250,000 14 At an interest rate of 10% per year, what is the equivalent annual cost of the project? Find the AW value using tabulated factors The equivalent annual cost of the project is $- 980,731.95
The following data are accumulated by Lone Star Security in evaluating two competing investment proposals. Category Surveillance Equipment Patrol Truck Amount of Investment $40,500 $55,000 Useful life 8 years 11 years Estimated residual value $3,000 $6,000 Estimated total income over the useful life $25,000 $38,700 Determine the expected average rate of return for each proposal. Year Net Income Net Cash Flow Year 1 $43,500 $81,000 Year 2 26,500 64,000 Year 3 13,500 50,500 Year 4 2,900 40,000 The following data are accumulated by Geddes Company in evaluating the purchase of $150,000 of equipment, having a four-year useful life: Assuming that the desired rate of return is 15%, determine the net present value for the proposal. Use the table of the present value of $1 appearing in Exhibit 2 of this chapter. Would management be likely to look with favor on the proposal? Explain.
of equipment have an initial investment of $728,831. 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 $233,000 $291,000 23 4569 207,000 270,000 207,000 249,000 165,000 256,000 126,000 7 8 105,000 91,000 91,000 The estimated residual value of the diamond core drill at the end of Year 4 is $290,000. 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 3 0.840 0.751 0.712 0.658 0.579 7 45 65 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 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 12%. Use the present value table appearing above. Diamond Core Drill Hydraulic…
Roberts Company is considering an investment in equipment that is capable of producing moreefficiently than the current technology. The outlay required is $2,293,200. The equipment isexpected to last five years and will have no salvage value. The expected cash flows associatedwith the project are as follows: Year Cash Revenues Cash Expenses 1 $2,981,160 $2,293,200 2 2,981,160 2,293,200 3 2,981,160 2,293,200 4 2,981,160 2,293,200 5 2,981,160 2,293,200 Required:1. Compute the project’s payback period.2. Compute the project’s accounting rate of return.3. Compute the project’s net present value, assuming a required rate of return of 10 percent.4. Compute the project’s internal rate of return.
Do not give answer in image
Subject: accounting

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS