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...

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:

The estimated residual value of the processing mill at the end of Year 4 is $280,000.

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 tables presented in this chapter (Exhibits 2 and 5).