26. ( rare metals from land owned by the state of Nevada. To obtain the rights, HHM agrced to restore the land to a suitable condition for other uses after its exploration and extraction activities. HHM incurred exploration and development costs of $85 million on the project. HHM also purchased new trucks for several crew members, totaling $2 million. Hetfield Heavy Metals (HHM) paid $600 million for the right to explore and extract HHM has a credit-adjusted risk free interest rate is 8%. It estimates the possible cash flows for restoring the land, five years after its extraction activities begin, as follows: Probability 70% Cash Outflow S 80 million S100million 30% Calculate HHM's asset retirement obligation (ARO) and provide the total value of the mine that will show on HHM's balance sheet. Show all work and write final answers in the space provided.
26. ( rare metals from land owned by the state of Nevada. To obtain the rights, HHM agrced to restore the land to a suitable condition for other uses after its exploration and extraction activities. HHM incurred exploration and development costs of $85 million on the project. HHM also purchased new trucks for several crew members, totaling $2 million. Hetfield Heavy Metals (HHM) paid $600 million for the right to explore and extract HHM has a credit-adjusted risk free interest rate is 8%. It estimates the possible cash flows for restoring the land, five years after its extraction activities begin, as follows: Probability 70% Cash Outflow S 80 million S100million 30% Calculate HHM's asset retirement obligation (ARO) and provide the total value of the mine that will show on HHM's balance sheet. Show all work and write final answers in the space provided.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:26. (
rare metals from land owned by the state of Nevada. To obtain the rights, HHM agreed to restore
the land to a suitable condition for other uses after its exploration and extraction activities. HHM
incurred exploration and development costs of $85 million on the project. HHM also purchased
new trucks for several crew members, totaling $2 million.
Hetfield Heavy Metals (HHM) paid $600 million for the right to explore and extract
HHM has a credit-adjusted risk free interest rate is 8%. It estimates the possible cash flows for restoring
the land, five years after its extraction activities begin, as follows:
Cash Outflow
S 80 million
$100million
Probability
70%
30%
Calculate HHM's asset retirement obligation (ARO) and provide the total value of the mine that will
show on HHM's balance sheet. Show all work and write final answers in the space provided.
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