Net Present Value-Unequal LivesDakota Mining Company has two competing proposals: a diamond core drill or a hydraulic excavator. Both pieces of equipmenthave an initial investment of $710,000. The net cash flows estimated for the two proposals are as follows:Net Cash FlowYearDiamond Core DrillNet Cash FlowHydraulic Excavator1$308,0002260,000$347,000315,0003260,000313,0004268,000318,0005177,0006142,0007139,0008139,000The 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, andinput your answers in the questions below.Open spreadsheetDetermine which equipment should be favored, comparing the net present values of the two proposals and assuming aminimum rate of return of 6%. If required, round to the nearest dollar.Diamond Core DrillHydraulic ExcavatorNet present valueWhich project should be favored?Diamond Core DrillFeedbackCheck My WorkFor each proposal, multiply the present value factor for each year (Exhibit 2) by that year's net cash flow. Use the residual value of theProcessing Mill to equate the useful lives (Exhibit 2). Subtract the amount to be invested from the total present value of the net cashflow.

Net present value refers to the method of capital budgeting used for evaluating the viability of the…

Answered: Dakota Mining Company has two competing…

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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San Lucas Corporation is considering investment in robotic machinery based upon the following estimates: a. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of 700,000. Use the present value tables appearing in Exhibits 2 and 5 of this chapter. b. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of 500,000, 700,000, and 900,000. Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. c. Determine the minimum annual net cash flow necessary to generate a positive net present value, assuming a desired rate of return of 10%. Round to the nearest dollar. d. Interpret the results of parts (a), (b), and (c).
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