Net Present Value-Unequal Lives Bunker HH Mining Company has two competing proposals: a processing mill and an electric shovel. Both pleces of equipment have an initial investment of $568,712. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Processing Mill Electric Shovel 1 $195,000 $244,000 2 174,000 226,000 3 174,000 209,000 138,000 215,000 Year 5 105,000 6 88,000 76,000 7 8 76,000 The estimated residual value of the processing mill at the end of Year 4 is $240,000 3 4 5 6 Present Value of $1 at Compound Interest Year 6% 10V 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 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 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 a minimum rate of return of 15% Use the present value table appearing above. Processing Mill Electric Shovel Present value of net cash flow total 7 8 9 3 Less amount to be invested Net present value Which project should be favored