Beechnut Mines began developing an open pit copper and zinc mine in northern Ontario in April 2023. As part of the regulatory approvals to develop and extract minerals from the site, the company committed to restore the mine site. Given the nature of open pit mining, it is not possible to fully restore the site to its original state. Nevertheless, the commitment requires the company to replant the area such that it will be suitable for wildlife and recreation (hiking, paddling, etc.). An independent environmental consultant hired by the mining regulator has estimated that the future site restoration costs will amount to $60 million at the end of the production life of the mine Management estimates that the mine will begin production in the spring of 2025 and continue for 30 years. Beechnut has a March 31 year-end date and an incremental borrowing rate of 9%. Required a. Compute the present value of the future site restoration costs as of the spring of 2023. (Round your final answer to the nearest whole dollar.) 3,806,303 b. Compute the amount of depreciation expense related to the site restoration costs for the years ending 2024, 2025, and 2026 using the straight-line method. (For a depreciation amount with a $0 balance, make sure to enter "0" in the appropriate year.) Depreciation 2024 Depreciation 2025 Depreciation 2026
Beechnut Mines began developing an open pit copper and zinc mine in northern Ontario in April 2023. As part of the regulatory approvals to develop and extract minerals from the site, the company committed to restore the mine site. Given the nature of open pit mining, it is not possible to fully restore the site to its original state. Nevertheless, the commitment requires the company to replant the area such that it will be suitable for wildlife and recreation (hiking, paddling, etc.). An independent environmental consultant hired by the mining regulator has estimated that the future site restoration costs will amount to $60 million at the end of the production life of the mine Management estimates that the mine will begin production in the spring of 2025 and continue for 30 years. Beechnut has a March 31 year-end date and an incremental borrowing rate of 9%. Required a. Compute the present value of the future site restoration costs as of the spring of 2023. (Round your final answer to the nearest whole dollar.) 3,806,303 b. Compute the amount of depreciation expense related to the site restoration costs for the years ending 2024, 2025, and 2026 using the straight-line method. (For a depreciation amount with a $0 balance, make sure to enter "0" in the appropriate year.) Depreciation 2024 Depreciation 2025 Depreciation 2026
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Beechnut Mines began developing an open pit copper and zinc mine in northern Ontario in April 2023. As part of the regulatory approvals to develop and extract minerals from the site, the company committed to restore the
mine site. Given the nature of open pit mining, it is not possible to fully restore the site to its original state. Nevertheless, the commitment requires the company to replant the area such that it will be suitable for wildlife and
recreation (hiking, paddling, etc.). An independent environmental consultant hired by the mining regulator has estimated that the future site restoration costs will amount to $60 million at the end of the production life of the mine.
Management estimates that the mine will begin production in the spring of 2025 and continue for 30 years. Beechnut has a March 31 year-end date and an incremental borrowing rate of 9%.
Required
a. Compute the present value of the future site restoration costs as of the spring of 2023. (Round your final answer to the nearest whole dollar.)
$
3,806,303
b. Compute the amount of depreciation expense related to the site restoration costs for the years ending 2024, 2025, and 2026 using the straight-line method. (For a depreciation amount with a $0 balance, make sure to
enter "0" in the appropriate year.)
Depreciation 2024
Depreciation 2025
Depreciation 2026
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