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On May 1, 2021, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral
On May 1, 2021, 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 $10.1 million. Additional costs and purchases included the following (FV of $1, PV of $1, EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): Development costs in preparing the mine Mining equipment Construction of various structures on site $3,300,000 148,700 72,900 After the minerals are removed from the mine, the equipment will be sold for an estimated residual value of $11,000. The structures will be torn down Geologists estimate that 810,000 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 $610,000 710,000 510,000 Probability 30% 42% 30% Hecala's credit-adjusted risk-free interest rate is 9%. During 2021, Hecala extracted 121,000 tons of ore from the mine The company's fiscal year ends on December 31
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