None 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 $715,855. The net cash flows estimated for the two proposals are as follows:Net Cash FlowNet Cash FlowHydraulic Excavator$305,000YearDiamond Core Drill1$244,0002217,000283,0003217,000261,0004173,000268,0005132,0006110,0007895,00095,000The estimated residual value of the diamond core drill at the end of Year 4 is $310,000.Present Value of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83320.8900.8260.7970.7560.69430.8400.7510.7120.6580.57940.7920.6830.6360.5720.48250.7470.6210.5670.4970.40260.7050.5640.5070.4320.33570.6650.5130.4520.3760.27980.6270.4670.4040.3270.23390.5920.4240.3610.2840.194100.5580.3860.3220.2470.162Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 15%. Use the present value table appearing above.Diamond Core Drill Hydraulic ExcavatorPresent value of net cash flow totalAmount to be investedNet present valueWhich project should be favored?

A sequence of cash flows that happen at various points in time are covered by the net present value.…

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 $715,855. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year Diamond Core Drill Net Cash Flow Hydraulic Excavator 1 $244,000 $305,000 2 217,000 283,000 3 217,000 261,000 4 173,000 268,000 5 132,000 6 110,000 7 95,000 8 95,000 The estimated residual value of the diamond core drill at the end of Year 4 is $310,000.

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 $715,855. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year Diamond Core Drill Net Cash Flow Hydraulic Excavator 1 $244,000 $305,000 2 217,000 283,000 3 217,000 261,000 4 173,000 268,000 5 132,000 6 110,000 7 95,000 8 95,000 The estimated residual value of the diamond core drill at the end of Year 4 is $310,000.

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 21E: Net present value-unequal lives Bunker Hill Mining Company has two competing proposals: a processing...

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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 $770,000. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year Diamond Core Drill Net Cash Flow Hydraulic Excavator 1 $308,000 $340,000 2 273,000 325,000 3 273,000 325,000 4 251,000 325,000 5 173,000 6 137,000 7 132,000 8 132,000 The 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. 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. Diamond Core Drill Hydraulic Excavator Net present value $ 69,413.64 X 115,058.20 X
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