Simpson Mining is obligated to restore leased land to its original condition after its excavation activities...
Simpson Mining is obligated to restore leased land to its original condition after its excavation activities are completed in three years. The cash flow possibilities and probabilities for the restoration costs in 3 years are as follows:
| Cash overflow | Probability | ||||
| $ | 111,000 | 20 | % | ||
| 161,000 | 40 | % | |||
| 211,000 | 40 | % | |||
The company's credit-adjusted risk-free interest rate is 4%. The
liability that Simpson must record at the beginning of the project
for the restoration costs is (FV of $1, PV of $1, FVA of $1, PVA of
$1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s)
from the tables provided and round final answer to nearest whole
dollar amount.):
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Simpson Mining is obligated to restore leased land to its
original condition after its excavation activities...
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and spent an additional $730,000 to prepare the mine for extraction
of the copper. After the copper is extracted in approximately four
years, the company is required to restore the land to its original
condition, including repaving of roads and replacing a greenbelt.
The company has provided the following three cash flow
possibilities for the restoration costs: (FV of $1,...
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and spent an additional $730,000 to prepare the mine for extraction
of the copper. After the copper is extracted in approximately four
years, the company is required to restore the land to its original
condition, including repaving of roads and replacing a greenbelt.
The company has provided the following three cash flow
possibilities for the restoration costs: (FV of $1,...
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