Southport Mining Corporation Is Considering a New Mining Venture in Indonesia

question 26

Essay

Southport Mining Corporation is considering a new mining venture in Indonesia. There are two uncertainties associated with this prospect; the metallurgical properties of the ore and the net price (market price minus mining and transportation costs) of the ore in the future.
The metallurgical properties of the ore would be classified as either "high grade" or "low grade". Southport's geologists have estimated that there is a 70% chance that the ore will be "high grade", and otherwise, it will be "low grade". Depending on the net price, both ore classifications could be commercially successful.
The anticipated net prices depended on market conditions, and also on the metallurgical properties of the ore. Southport's economists have simplified the continuous distribution of possible prices into a two-outcome discrete distribution ("high" or "low" net price) for the investment analysis. The probabilities of these net prices, and the associated outcomes (in millions of dollars), are summarized below.
-Since the core test can only sample a small part of the mine, Southport's geologists believe it is somewhat unrealistic to view it as a perfectly reliable test. Based on similar tests they have conducted in the past, they believe that if the metallurgical properties of the ore are actually High Grade, then the probability that this test will return "favorable" results is 0.95. If the metallurgical properties are Low Grade, the probability that this test will return "favorable" results is only 0.25. Otherwise, the test results will be considered "unfavorable". Given this information, what are the posterior probabilities that the ore will be a High Grade and Low Grade, given the core test report?

Determine the effects of closing entries on net income, net loss, and individual account balances.

Comprehend the purpose and procedure of closing entries in the accounting cycle.

Understand the treatment of withdrawals in relation to the capital account.

Analyze and correct errors arising from omitted closing entries.

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Definitions:

Korea

A country in East Asia, known for its rich history, culture, and divide into two distinct nations: North Korea and South Korea, following the Korean War.

Artistic Golden Age

A period in history marked by significant achievements and contributions in the arts within a culture or civilization.

Silla Kingdom

An ancient kingdom located on the Korean Peninsula, lasting from 57 BC to 935 AD, known for its significant role in the unification of Korea.

Fogong Si Pagoda

A notable example of a wooden Chinese pagoda, originating from the 11th century, located in Ying County, Shanxi Province.