An engineer for a mining company is called upon to examine a mining property which is for sale and to advise his employer regarding its value. He estimates the “ore in sight” to be 440,000 tons and will base his value on this figure. The existing facilities will permit the removal of about 55,000 tons of ore per year. He estimates that the mining, transportation, and smelting cost will total about P5.75 per ton of ore and that the gross income per ton mined will be P11.75. Administrative expenses will be an addition of P30,000 per year. What will be the value of the mine to yield a 15% annual return on the investment throughout its life and to provide in addition for reinvestment of earnings at 4% so that the original capital investment will be intact at the end of the life of the mine? (depletion)
An engineer for a mining company is called upon to examine a mining property which is for sale and to advise his employer regarding its value. He estimates the “ore in sight” to be 440,000 tons and will base his value on this figure. The existing facilities will permit the removal of about 55,000 tons of ore per year. He estimates that the mining, transportation, and smelting cost will total about P5.75 per ton of ore and that the gross income per ton mined will be P11.75. Administrative expenses will be an addition of P30,000 per year. What will be the value of the mine to yield a 15% annual return on the investment throughout its life and to provide in addition for reinvestment of earnings at 4% so that the original capital investment will be intact at the end of the life of the mine? (depletion)
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 6PA: Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one...
Related questions
Question
An engineer for a mining company is called upon to examine a mining property which is for sale and to advise his employer regarding its value. He estimates the “ore in sight” to be 440,000 tons and will base his value on this figure. The existing facilities will permit the removal of about 55,000 tons of ore per year. He
estimates that the mining, transportation, and smelting cost will total about P5.75 per ton of ore and that the gross income per ton mined will be P11.75.
Administrative expenses will be an addition of P30,000 per year. What will be the value of the mine to yield a 15% annual return on the investment throughout
its life and to provide in addition for reinvestment of earnings at 4% so that the original capital investment will be intact at the end of the life of the mine?
(depletion)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
College Accounting, Chapters 1-27
Accounting
ISBN:
9781337794756
Author:
HEINTZ, James A.
Publisher:
Cengage Learning,
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning