Jackpot Mining is obligated to the State of California to restore leased land to its original condition after its mining activities are over in six years. The cash flow possibilities and probabilities for the restoration costs in six years are as follows:
The company's credit-adjusted risk-free interest rate is 4%.
Required:
Calculate the liability that Jackpot must record at the beginning of the project for the restoration costs.
$$\begin{array} { c c }
\text { Cash Outflow } & \text { Probability } \
\hline \text { \$5 million } & 10 \% \
10 \text { million } & 30 \% \
12 \text { million } & 40 \% \
15 \text { million } & 20 \%
\end{array}$$

Question

Jackpot Mining is obligated to the State of California to restore leased land to its original condition after its mining activities are over in six years. The cash flow possibilities and probabilities for the restoration costs in six years are as follows:
The company's credit-adjusted risk-free interest rate is 4%.
Required:
Calculate the liability that Jackpot must record at the beginning of the project for the restoration costs.
 $$\begin{array} { c c } 
\text { Cash Outflow } & \text { Probability } \
\hline \text { \$5 million } & 10 \% \
10 \text { million } & 30 \% \
12 \text { million } & 40 \% \
15 \text { million } & 20 \%
\end{array}$$

Quizplus · Accepted Answer

The Answer of Jackpot Mining is obligated to the State of California to restore leased land to its original condition after its mining activities are over in six years. The cash flow possibilities and probabilities for the restoration costs in six years are as follows:
The company's credit-adjusted risk-free interest rate is 4%.
Required:
Calculate the liability that Jackpot must record at the beginning of the project for the restoration costs.
 $$\begin{array} { c c } 
\text { Cash Outflow } & \text { Probability } \
\hline \text { \$5 million } & 10 \% \
10 \text { million } & 30 \% \
12 \text { million } & 40 \% \
15 \text { million } & 20 \%
\end{array}$$

Jackpot Mining Is Obligated to the State of California to Restore