The estimated residual value of the processing mill at the end of Year 4 is $200,000.Present Value of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83320.8900.8260.7970.7560.6940.8400.7510.7120.6580.57940.7920.6830.6360.5720.4820.7470.6210.5670.4970.4020.7050.5640.5070.4320.33570.6650.5130.4520.3760.2790.6270.4670.4040.3270.2339.0.5920.4240.3610.2840.194100.5580.3860.3220.2470.162Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimumrate of return of 15%. Use the present value table appearing above.Processing MillElectric ShovelPresent value of net cash flow total$4$Less amount to be invested$4$Net present value6. Net Present Value-Unequal LivesBunker Hill Mining Company has two competing proposals: a processing mill and an electricshovel. Both pieces of equipment have an initial investment of $463,768. The net cash flowsestimated for the two proposals are as follows:Net Cash FlowYearProcessing MillElectric Shovel1$158,000$198,0002141,000183,0003141,000169,0004112,000174,00085,00071,000762,000862,000The estimated residual value of the processing mill at the end of Year 4 is $200,000.Present Value of $1 at Compound Interest

Answered: Image /qna-images/answer/4f9501c4-0349-42b4-bd2a-5438893f062e.jpg

Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 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

Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 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

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...

See similar textbooks

Similar questions

Net present value method, internal rate of return method, and analysis for a service company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: The wind turbines require an investment of 887,600, while the biofuel equipment requires an investment of 911,100. No residual value is expected from either project. Instructions 1. Compute the following for each project: A. The net present value. Use a rate of 6% and the present value of an annuity table appearing in Exhibit 5 of this chapter. B. A present value index. (Round to two decimal places.) 2. Determine the internal rate of return for each project by (A) computing a present value factor for an annuity of 1 and (B) using the present value of an annuity of 1 table appearing in Exhibit 5 of this chapter. 3. What advantage does the internal rate of return method have over the net present value method in comparing projects?
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 $710,000. 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 2 260,000 $347,000 315,000 3 260,000 313,000 4 268,000 318,000 5 177,000 6 142,000 7 139,000 8 139,000 The estimated residual value of the diamond core drill at the end of Year 4 is $290,000. 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 6%. If required, round to the nearest dollar. Diamond Core Drill Hydraulic Excavator Net present value Which project should be…
Net Present Value-Unequal Lives Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $825,099. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year Processing Mill Electric Shovel 1 $263,000 $329,000 2 234,000 305,000 3 234,000 281,000 4 187,000 289,000 142,000 6 118,000 7 103,000 103,000 The estimated residual value of the processing mill at the end of Year 4 is $330,000. 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 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 0.627 0.467 0.404 0.327 0.233 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…
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
Net Present Value—Unequal Lives Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $695,302. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year Processing Mill Electric Shovel 1 $221,000 $276,000 2 197,000 256,000 3 197,000 236,000 4 157,000 243,000 5 119,000 6 99,000 7 86,000 8 86,000 The estimated residual value of the processing mill 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 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…
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 $710,000. The net cash flows estimated for the two proposals are as follows: Year Net Cash Flow Diamond Core Drill Net Cash Flow Hydraulic Excavator 1 $317,000 $341,000 23 4569 7 8 256,000 317,000 256,000 312,000 257,000 319,000 170,000 138,000 147,000 147,000 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. X 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 12%. If required, round to the nearest dollar. Diamond Core Drill Net present value 592,850 X $ tA Hydraulic Excavator 271,980 V
Net Present Value—Unequal Lives Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $724,991. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year      Processing Mill      Electric Shovel 1 $221,000 $276,000 2 197,000 256,000 3 197,000 236,000 4 157,000 243,000 5 119,000 6 99,000 7 86,000 8 86,000 The estimated residual value of the processing mill 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 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 0.386 0.322 0.247 0.162…
Net Present Value—Unequal Lives 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. 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 0.386 0.322 0.247 0.162 Determine which…
Net Present Value—Unequal Lives 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. 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 0.386 0.322 0.247 0.162 Determine which…
Net Present Value—Unequal Lives Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $638,424. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year      Processing Mill      Electric Shovel 1 $219,000 $274,000 2 195,000 254,000 3 195,000 234,000 4 155,000 241,000 5 118,000 6 99,000 7 85,000 8 85,000 The estimated residual value of the processing mill at the end of Year 4 is $270,000. 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 0.386 0.322 0.247 0.162…
Net Present Value—Unequal Lives Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $670,208. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year      Processing Mill      Electric Shovel 1 $213,000 $266,000 2 190,000 247,000 3 190,000 228,000 4 151,000 234,000 5 115,000 6 96,000 7 83,000 8 83,000 The estimated residual value of the processing mill at the end of Year 4 is $270,000. 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 0.386 0.322 0.247 0.162…
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 $900,000. The net cash flows estimated for the two proposals are as follows: Year Net Cash FlowDiamond Core Drill Net Cash FlowHydraulic Excavator 1 $300,000 $475,000 2   300,000   450,000 3   275,000   350,000 4   250,000   200,000 5   200,000 6   100,000 7    50,000 8    50,000 The estimated residual value of the diamond core drill at the end of Year 4 is $450,000. 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 0.386 0.322 0.247 0.162 Determine which equipment should be favored,…