Butcher Coal Company bought a coalmine in East Tennessee for $4M. It is expecting to excavate 180,000 tons of coal every year for the next 20 years. The gross revenue will be $9 per ton. The accounting department expects the net revenue will be $3.50 per ton after all expenses.
Determine i. the annual depletion on a cost basis.
Hints: RR in equation is 3600K.The textbook solution for the similar problem doesn’t show this calculation because the ratio FC/RR is just 1/(number of years) for all years when the rate of excavation is constant.