On May 1, 2024, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine in New Mexico for $9.9 million. Additional costs and purchases included the following. Note: Use tables, Excel, or a financial calculator. (EV. of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Development costs in preparing the mine Mining equipment $ 3,100,000 146,300 63,200 Construction of various structures on site After the minerals are removed from the mine, the equipment will be sold for an estimated residual value of $12,000. The structures will be torn down. Geologists estimate that 790,000 tons of ore can be extracted from the mine. After the ore is removed, the land will revert back to the state of New Mexico. The contract with the state requires Hecala to restore the land to its original condition after mining operations are completed in approximately four years. Management has provided the following possible outflows for the restoration costs: Cash Outflow $ 590,000 690,000 790,000 Probability 40% 30% 30% Hecala's credit-adjusted risk-free interest rate is 7%. During 2024, Hecala extracted 119,000 tons of ore from the mine. The company's fiscal year ends on December 31.
On May 1, 2024, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine in New Mexico for $9.9 million. Additional costs and purchases included the following. Note: Use tables, Excel, or a financial calculator. (EV. of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Development costs in preparing the mine Mining equipment $ 3,100,000 146,300 63,200 Construction of various structures on site After the minerals are removed from the mine, the equipment will be sold for an estimated residual value of $12,000. The structures will be torn down. Geologists estimate that 790,000 tons of ore can be extracted from the mine. After the ore is removed, the land will revert back to the state of New Mexico. The contract with the state requires Hecala to restore the land to its original condition after mining operations are completed in approximately four years. Management has provided the following possible outflows for the restoration costs: Cash Outflow $ 590,000 690,000 790,000 Probability 40% 30% 30% Hecala's credit-adjusted risk-free interest rate is 7%. During 2024, Hecala extracted 119,000 tons of ore from the mine. The company's fiscal year ends on December 31.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:On May 1, 2024, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine
in New Mexico for $9.9 million. Additional costs and purchases included the following.
Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1)
$ 3,100,000
146,300
63,200
Development costs in preparing the mine
Mining equipment
Construction of various structures on site
After the minerals are removed from the mine, the equipment will be sold for an estimated residual value of $12,000. The structures
will be torn down.
Geologists estimate that 790,000 tons of ore can be extracted from the mine. After the ore is removed, the land will revert back to the
state of New Mexico.
The contract with the state requires Hecala to restore the land to its original condition after mining operations are completed in
approximately four years. Management has provided the following possible outflows for the restoration costs:
Cash Outflow Probability
40%
$ 590,000
690,000
790,000
30%
30%
Hecala's credit-adjusted risk-free interest rate is 7%. During 2024, Hecala extracted 119,000 tons of ore from the mine. The company's
fiscal year ends on December 31.
Required:
Transcribed Image Text:5. During 2025, Hecala changed its estimate of the total amount of ore originally in the mine from 790,000 to 990,000 tons.
Calculate the depletion of the mine and depreciation of the mining facilities and equipment for 2025, assuming Hecala extracted
149,000 tons of ore in 2025.
Complete this question by entering your answers in the tabs below.
Answer is complete but not entirely correct.
Required 1 Required 2
Required 4 Required 5
During 2025, Hecala changed its estimate of the total amount of ore originally in the mine from 790,000 to 990,000 tons.
Calculate the depletion of the mine and depreciation of the mining facilities and equipment for 2025, assuming Hecala
extracted 149,000 tons of ore in 2025.
Note: Do not round your intermediate calculations. Round "Depreciation" and "Depletion" rates to 4 decimal places. Enter
your answers in whole dollars rounded to the nearest whole number.
Show less A
Depletion
Depreciation of equipment
Depreciation of structures
Required 3
S
$
S
2025
1,964,267Ⓒ
21,567
9,813
< Required 4
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