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98. Santa Cruz Oil obligated to the State of Nevada to

Question : 98. Santa Cruz Oil obligated to the State of Nevada to : 1412664

 

 

98.

Santa Cruz Oil is obligated to the State of Nevada to restore leased land to its original condition after its oil drilling activities are over in four years. The cash flow possibilities are probabilities for the restoration costs in four years are as follows:

 

Cash Outflow

Probability

$20 million

20%

30 million

40%

40 million

30%

50 million

10%



The company's credit-adjusted risk-free interest rate is 6%.

Required:

Calculate the liability that Santa Cruz must record at the beginning of the project for the restoration costs.


 
 

 

The expected cash flow is

 

 

 

 

 

99.

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:

 

Cash Outflow

Probability

$ 5 million

10%

10 million

30%

12 million

40%

15 million

20%



The company's credit-adjusted interest rate is 4%.

Required:

Calculate the liability that Jackpot must record at the beginning of the project for the restoration costs.


 
 

 

 

 

 

 

 

Solution
5 (1 Ratings )

Solved
Accounting 4 Weeks Ago 205 Views
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