Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,600,000 in 2024 for the mining site and spent an additional $720,000 to prepare the mine for extraction of the copper After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs Note: Use tables, Excel, or a financial calculator (EV of $1. PV of St. PVA of St. PVA of St. EVAD of S1 and PVAD of $1 Cash Outflow $ 420,000 $20,000 720,000 Probability 25% 45% To aid extraction, Jackpot purchased some new equipment on July 1, 2024 for $240,000. After the copper is removed from this mine the equipment will be sold. The credit adjusted risk free rate of interest is 12% Required: 1 Determine the cost of the copper mine 2. Prepare the journal entries to record the acquisition costs of the mine and the purchase of equipment
Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,600,000 in 2024 for the mining site and spent an additional $720,000 to prepare the mine for extraction of the copper After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs Note: Use tables, Excel, or a financial calculator (EV of $1. PV of St. PVA of St. PVA of St. EVAD of S1 and PVAD of $1 Cash Outflow $ 420,000 $20,000 720,000 Probability 25% 45% To aid extraction, Jackpot purchased some new equipment on July 1, 2024 for $240,000. After the copper is removed from this mine the equipment will be sold. The credit adjusted risk free rate of interest is 12% Required: 1 Determine the cost of the copper mine 2. Prepare the journal entries to record the acquisition costs of the mine and the purchase of equipment
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 12P: After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide...
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