Solution-Determine which equipment should be favored

Determine which equipment should be favored

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Reference no: EM132772332

Problem - 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	$310,000	$330,000
2	260,000	325,000
3	260,000	325,000
4	260,000	320,000
5	180,000
6	130,000
7	120,000
8	120,000

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%.

Reference no: EM132772332

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Determine which equipment should be favored

Reference no: EM132772332

Reference no: EM132772332

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