Use the Following to Answer Questions

question 98

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 reported on MMC's balance sheet one year after the extraction activities begin is:

• A)$0.
• B)$14.7 million.
• C)$15.7 million.
• D)$19.3 million.

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Definitions:

Local Levels

Pertains to activities, governance, or administration executed at a community, town, or city scale, focusing on the immediate geographical area.

Diseconomies of Scale

A situation in which a firm experiences an increase in average costs due to an increase in its size or output level, often resulting from inefficiencies and higher per unit costs.

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Demand Curves

Visual diagrams that illustrate the connection between a product's price and the amount consumers are willing to buy.