Simpson Mining is obligated to restore leased land to its original condition aft

Question

Simpson Mining is obligated to restore leased land to its original condition after its excavation activities are completed in three years. The cash fow possibilities and probabilities for the restoration costs in 3 years are as follows: $119,000 169,000 219,000 308 30% 40% The company's credit-adjusted risk-free interest rate is 6% The latity that Simpson must record at the beginnng of the project for the restoration costs is (E ofS·PLof$1. E Aat St PyAof$1. P of 1 and AD osn (Use appropriate factor(s) from the tables provided and round final answer to nearest whole dollar amount) Multiple Choice 174.000 C Prev11 of 15 Next MacBook Air 5 commandop

Explanation / Answer

we need to use pv formula to find out the present value cost of restoration that will happen in third year.

pv = cash flow / (1+ int rate )n

n= 3
int rate =6%

pv = 174000/(1.06)3
=174000/1.191016
=146094

answer is option c

cash flow (a) probability  (b) estimated cf  (a*b) 119000 0.3 35700 169000 0.3 50700 219000 0.4 87600 total 174000

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---