Use the Following to Answer Questions

question 38

Multiple Choice

Use the following to answer questions
Montana Mining Co.(MMC) paid $200 million for the right to explore and extract rare metals from land owned by the state of Montana.To obtain the rights,MMC agreed to restore the land to a suitable condition for other uses after its exploration and extraction activities.MMC incurred exploration and development costs of $60 million on the project.
MMC has a credit-adjusted risk free interest rate is 7%.It estimates the possible cash flows for restoring the land,three years after its extraction activities begin,as follows:

-The asset retirement obligation (rounded) that should be recognized by MMC at the beginning of the extraction activities is:

• A)$ 8.2 million.
• B)$14.7 million.
• C)$ 18 million.
• D)$ 30 million.

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