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Smithson Mining operates a silver mine in Nevada. Acquisition, exploration, and development costs totaled $6.9 million. After the silver is extracted in approximately five years,
Smithson Mining operates a silver mine in Nevada. Acquisition, exploration, and development costs totaled $6.9 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: $630,000, 20% probability; $680,000, 45% probability; and $780,000, 35% probability. The company's credit-adjusted, risk-free rate of interest is 5%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) What is the initial cost of the silver mine? {Enter your answers in whole dollars.)
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