Simpson Mining is obligated to restore leased land to its original condition after its excavation activities are completed in three years. The cash flow possibilities and probabilities for the restoration costs in three years are as follows: The company's credit-adjusted risk-free interest rate is 5%. The liability that Simpson must record at the beginning of the project for the restoration costs is: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
A) $129,576.
B) $145,000.
C) $125,257.
D) $172,768.

Question

Simpson Mining is obligated to restore leased land to its original condition after its excavation activities are completed in three years. The cash flow possibilities and probabilities for the restoration costs in three years are as follows:  The company's credit-adjusted risk-free interest rate is 5%. The liability that Simpson must record at the beginning of the project for the restoration costs is: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
A) $129,576. 
B) $145,000. 
C) $125,257. 
D) $172,768.

Quizplus · Accepted Answer

Expected cash flow: 11ea937b_3640_5ec3_a419_637e6c449ace_TB2599_00 *PV of $1: n = 3; i = 5%

Simpson Mining Is Obligated to Restore Leased Land to Its