Dakota Mining Company has two competing proposals: a diamond core drill or a hydraulic excavator. Both pieces of equipment have an initial investment of $$780,000.$ The net cash flows estimated for the two proposals are as follows:

Year Net Cash Flow

Diamond Core Drill Net Cash Flow

Hydraulic Excavator

$1$ $$311,000$ $$341,000$

$2265,000324,000$

$3265,000315,000$

$4263,000323,000$

$5171,000$

$6140,000$

$7127,000$

$8127,000$

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.

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.

Line Item Description Diamond Core Drill Hydraulic Excavator

Net present value fill in the blank $1$ of $2$$

fill in the blank $2$ of $2$$

Which project should be favored?

Net Present Value$$Unequal Lives

Dakota Mining Company has two competing proposals: a diamond core drill or a hydraulic excavator. The following data is provided:

DATA

Net Cash Flow

Year Diamond Core Drill Hydraulic Excavator

$1$ $$311,000$ $$341,000$

$2265,000324,000$

$3265,000315,000$

$4263,000323,000$

$4($residual value$)290,000$

$5171,000$

$6140,000$

$7127,000$

$8127,000$

Initial investment $$780,000$

Minimum rate of return $6\%$

REQUIRED:

Determine which equipment should be favored, comparing the net present values of the two proposals.

"Using formulas and cell references from the problem data, perform the required analysis.

Formulas entered in the green cells show in the orange cells. Transfer amounts to CNOWv$2$

for grading."

Diamond Core Drill Hydraulic Excavator Formulas

Net present value