1. Net Present ValueUnequal 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 $852,356. The net cash flows estimated for the two proposals are as follows:

   	Net Cash Flow
   Year	Processing Mill		Electric Shovel
   1	$272,000		$340,000
   2	242,000		316,000
   3	242,000		291,000
   4	193,000		299,000
   5	147,000
   6	122,000
   7	106,000
   8	106,000

   The estimated residual value of the processing mill at the end of Year 4 is $340,000.

   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 equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 12%. Use the present value table appearing above.

   	Processing Mill	Electric Shovel
   Present value of net cash flow total	$	$
   Less amount to be invested
   Net present value	$	$

   Which project should be favored?

   • Electric Shovel
   • Processing Mill
   • Neither because they are equal