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Question 13 During 2020, a company builds an oil platform off the coast of Newfoundland in order to extract oil from the ocean floor. The
Question 13 During 2020, a company builds an oil platform off the coast of Newfoundland in order to extract oil from the ocean floor. The cost to build was $1,000,000. The cost to float the platform out into the ocean and install it was $150.000. The law requires that the platform be dismantled at the end of its use, which is expected to be 5 years. The company estimates the future cost of dismantling would be $290,000 based on probability assessments and quotations from contractors. The risk-free rate of return is 6%. The company would be able to issue debt to third parties at a 3% risk premium. Ignoring depreciation, at what amount should the oil platform be recorded on the balance sheet as of December 31, 2020? Round your answer to the nearest whole dollar Do not use commas, symbols/units (eg. $. %) or spaces in your answers. For example, one thousand five hundred and twenty-three dollars should be entered as 1523. The Canvas system may enter a comma for you. That is fine. Leave it. 2 pts
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