Smithson Mining operates a silver mine in Nevada. Acquisition, exploration, and development costs totaled $6.6 million. After the silver is extracted in approximately five years, Smithson is obligated to restore the land to its original condition, including constructing a wildlife preserve. The company's controller has provided the following three cash flow possibilities for the restoration costs: (1) $600,000, 35% probability; (2) $650,000, 50% probability; and (3) $750,000, 15% probability. The company's credit-adjusted, risk-free rate of interest is 6%. What is the initial cost of the silver mine? Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Enter your answers in whole dollars. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Table or calculator function: Restoration Costs Acquisition, exploration and development Initial Cost n= i = %

Smithson Mining operates a silver mine in Nevada. Acquisition, exploration, and development costs totaled $6.6 million. After the silver is extracted in approximately five years, Smithson is obligated to restore the land to its original condition, including constructing a wildlife preserve. The company's controller has provided the following three cash flow possibilities for the restoration costs: (1) $600,000, 35% probability; (2) $650,000, 50% probability; and (3) $750,000, 15% probability. The company's credit-adjusted, risk-free rate of interest is 6%. What is the initial cost of the silver mine? Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Enter your answers in whole dollars. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Table or calculator function: Restoration Costs Acquisition, exploration and development Initial Cost n= i = %

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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